The ADANI Group Remote Prospects
A financial analysis of Adani’s coal gamble in Australia’s Galilee Basin
The sector is facing a number of very strong headwinds. The list includes sharply increasing costs, weaker markets, declining productivity, prices falling from historic highs and a strong local currency.
Harry Kenyon-Slaney, CEO of Rio Tinto Energy Groupi November 2013
1 Date: November 2013
Published by: The Institute for Energy Economics and Financial Analysis
Co-Authors: Tim Buckley
Tom Sanzillo
Commissioned by: Greenpeace Australia Pacific
Background on the authors
TIM BUCKLEY TOM SANZILLO Tim Buckley is employed by Arkx Investment Management Tom joined the Institute for Energy Economics and Financial Pty Ltd (AFSL 317 837), a provider of independent financial Analysis (IEEFA) as Director of Finance in 2012. In conjunction investment analysis. Tim has over twenty-five years of with Tim, Tom authored “Stranded: A Financial Analysis of experience in analysing major listed companies across a GVK’s Proposed Alpha Coal Project in Australia’s Galilee multitude of industries both within Australia and in the global Basin.”ii context. Tim was a co-founder of Arkx Investment Management Since 2007 Tom has run his own company TR Rose Associates. in 2007, a Sydney-based fund manager that invested in the The company has served clients working to create alternatives leading global listed companies best leveraged to the move to fossil fuel use in America. The work has consisted of to a low carbon economic future. In 2010 Tim became joint research, reports, testimony and advice on construction costs Managing Director and head of Equity Research at Arkx. The of coal plants and alternatives, financial reviews (involving Clean Energy Fund was closed in August 2013 due to lack of independently owned utilities, cooperatives, public authorities Australian investor interest. and hybrid organisational structures), credit analysis, coal Prior to this, Tim was Managing Director, Deputy then Head market and price analyses, rate impact assessments, federal of Australasian Equity Research at Citigroup from 1998 to financing, federal coal leases, coal export markets and policy, 2007. Tim was on the Citigroup Australasian Commitments load forecast reviews, energy contracts and a series of other Committee for five years to 2007 overseeing financial market topics related to electricity generation. He has served as a transactions and underwritings. Tim was a top rated industrial financial advisor to the innovative Green Jobs/Green New York analyst first with Macquarie Equities (1988-91) then County large scale residential energy efficiency retrofit program in New NatWest Securities (1992-96) in Australia, covering the leading York State. Tom has served on the Advisory Board on the industrial conglomerates as well as enjoying a specialisation future management of the Long Island Power Authority in New in the forestry, brewing and wine sectors. Tim then moved York State. His clients also have included business, labor and to Singapore to cover the Asian equity market during 1996- community organisations covering a host of public and private 1998 with Deutsche Bank, just in time to experience the Asian finance and policy issues. Financial Crisis! From 1990 to 2007, Tom served in senior management Tim has authored a number of financial clean energy articles positions to the publicly elected Chief Financial Officers of that have been published over 2011-2012 in RenewEconomy. New York. From 2003 to 2007, he served as the First Deputy com and Climate Spectator, Australia’s two leading online Comptroller for the State of New York. Tom was responsible for renewable industry websites. Tim is working as a financial a US$150bn globally invested public pension fund; oversight analyst consultant in the areas relating to the move to a low of state and 1600 units of local government budgets and carbon economy, including fossil fuel and related infrastructure public debt offerings; audit programs for all state agencies, assets at risk of being stranded in this process. public authorities (including power generation authorities) and local governments, and review and approval of state contracts. One estimate places the level of public assets under the State Comptroller’s watch at over $700bn. Due to an early resignation of the elected State Comptroller, Tom, as First Deputy Comptroller, served for a short period as the New York State Comptroller from 2006-07. His most recent publication on New York State government and finance is part of the 2012 Oxford Handbook of New York State Government and Finance.
2 Important Information This report is for information and educational purposes only. It is for the sole use of its intended recipient. It is intended solely as a discussion piece focused on the topic of the Adani Group and its Australian coal infrastructure proposals. Under no circumstance is it to be considered as a financial promotion. It is not an offer to sell or a solicitation to buy any investment referred to in this document; nor is it an offer to provide any form of investment service. This report is not meant as a general guide to investing, or as a source of any specific investment recommendation. While the information contained in this report is from sources believed reliable, we do not represent that it is accurate or complete and it should not be relied upon as such. Unless attributed to others, any opinions expressed are our current opinions only. Certain information presented may have been provided by third parties. The Institute for Energy Economics and Financial Analysis believes that such third-party information is reliable, but does not guarantee its accuracy, timeliness or completeness; and it is subject to change without notice. If there are considered to be material errors, please advise the authors and a revised version can be published.
3 Contents
Executive Summary 5
Section 1 Introduction: Carmichael Coal Mine Project 7
Section 2 Galilee Coal Basin: Background, Challenges and Opportunities 9
Section 3 Adani Group: Background, Challenges and Opportunities 10
Section 4 Structural problems at Adani Power 19
Section 5 Abbot Point Coal Terminal 24
Section 6 Rail Options for Adani Group in the Galilee Coal Basin 31
Section 7 Carmichael Coal Mine Project: Economic and Financial Risks 34
Section 8 Broader Dynamics of Global Coal Prices 44
Section 9 Environmental & Governance Issues 51
Section 10 Adani Group’s Australian Projects: Logistics and Delays 54
Appendices 56
Endnotes 60
4 Executive Summary
The Adani Group is a large Indian conglomerate controlled would flood the global seaborne thermal coal market (equal by the Adani family. The family operates a number of private to a 30% increase in global supply) and ensure it remains in businesses and owns a controlling stake in the listed Adani oversupply at a time when global demand and price forecasts Enterprises Ltd (Adani Enterprises). Adani Enterprises, in turn, indicate structural decline. A ‘successful’ commissioning of the has controlling interests in two listed entities – Adani Ports & Carmichael project would be likely to ensure the global thermal Special Economic Zone Ltd (Adani Ports) and Adani Power Ltd coal price remains below our forecast of Carmichael’s cash cost (Adani Power). of production. Adani Enterprises is proposing to develop an at peak 60 million • India’s power market is fatally flawed. It cannot absorb tonne per annum (Mtpa) thermal coal mine complex in the the high price of coal from the Carmichael project: One remote Galilee Coal Basin, 160 kilometres (km) north-west stated objective of the Carmichael project is to supply thermal of the town of Clermont, central Queensland, Australia. Coal coal into the Indian power market. The domestic price of coal produced would be transported by a greenfield rail line to Abbot in India is in the US$30/t range and the price Carmichael coal Point Port, where the company proposes a new 70Mtpa coal requires is over US$95/t (inclusive of shipping). Successful terminal (T0) in additional to an existing terminal (T1) for which it sales to India of Carmichael coal will place a substantial has a 99-year lease. Adani Enterprises anticipates selling much pressure on power generator profits and the price of electricity of the coal in India to support the nation’s plan to expand the in India. We see this as a flawed strategy, given conflicting use of coal-fired generation for its electricity grid. currency, fiscal and balance of trade dynamics in India. We view this US$7 billion (bn) proposal – the Carmichael Mine • Furthermore, fundamental policy shifts in China’s energy and Rail project (the Carmichael project) – as uncommercial for and economic growth initiatives suggest greater reliance on investors. The project’s economics don’t stack up. The short- and renewables and less support for costly and environmentally long-term price of coal globally, and within the principal outtake unsound coal generation projects. Reduced Chinese imports market of India, does not support the cost structure of this mining from the seaborne market will further depress coal prices and project. The Adani Group is also financially and operationally ensure underutilised mine capacity. constrained and faces a series of logistical barriers in Australia. The Adani Group is a weak partner for this expensive Key issues include: coal, rail and mine project in Australia. In the last several years the enterprise has announced an overly ambitious The Carmichael project is uneconomic – a high cost coal expansion plan, lost share value in critical segments and product in a low priced coal market with an uncertain is overleveraged. future. • The Adani Enterprises’ external equity market • Carmichael coal is a low quality, high cost product capitalisation is US$5.17bn against estimated Carmichael challenged by low market prices: Carmichael has a high strip project costs of US$7bn: While Adani Enterprises has ratio (16t:t) and the coal quality is low by Australian standards reported a combined equity market capitalisation of the group (20-30% ash and energy content of 5,260kcal net as received of US$30bn, we estimate total group market capitalisation is (NAR)). Open cut mining to 280 metres is significantly deeper actually US$5.17bn (including minority equity). Despite this than required in the south of the Galilee Coal Basin. We estimate weak capitalisation, Adani Enterprises has announced an an energy-adjusted cash cost of production of A$87/t (US$84/t, enormous list of new capital intensive ventures. inclusive of royalties, free on board (FOB)). • The Adani Group is highly geared: Against an external • Carmichael’s coal cost structure is likely to remain above market capitalisation of US$5.17bn, The Adani Group has an the global thermal coal price for the foreseeable future: estimated US$12bn of net debt, a significant portion of which Should the Carmichael project proceed, it will have to build all is US$-denominated with limited hedging. Adani Power is the required greenfield rail, power and water infrastructure. Once of particular concern, being loss-making with net debt over complete, such infrastructure could facilitate the development 300% of its current market capitalisation. of up to eight other massive thermal coal mines in the Galilee Basin. An additional 313Mtpa of thermal coal for export
5 Executive Summary (continued)
• Adani Abbot Point Coal Terminal (AAPCT) now represents The Adani Group faces a series of logistical and US$2bn of “off-balance” sheet group debt: The Adani operational hurdles that have caused delay and threaten Ports’ transfer of AAPCT to the Adani family’s private group to push the current estimated price of US$7bn upward. in March 2013 takes off the balance sheet the estimated • The Adani Group has suffered a series of delays to its US$1.95bn of debt in AAPCT. The transfer also moved the Australian mining, rail and port plans: Adani Enterprises ownership of AAPCT to a non-Indian domiciled entity. initially expected to have the Carmichael project selling coal • Adani Power is financially weak and operationally by 2014. Adani Enterprises concedes this timetable has been underperforming: Adani Power’s share price is down 46% pushed out to 2016, but we think 2017 at the earliest is more year-to-date and down 74% over three years – a massive likely with full production beyond 2022. Any delays would underperformance relative to the MSCI India Index (“INP”). continue to squeeze the Adani Group’s cashflow. Adani Enterprises is down 39% year-to-date and down • Carmichael coal is in a very remote location: Carmichael 70% over three years. The inability to source domestic is 400km from the coast and there is no rail infrastructure coal supplies has left Adani Power with power purchase within 200km. There is also no commercial power or water agreements in rupees and an increasing proportion of infrastructure within 200km and there is no sealed road imported coal input costs denominated in US dollars. access for 90km. • Adani Enterprises does not have a long or successful history of coal mining: Adani Enterprises has mined 2-4Mtpa in Indonesia over 2010-2013, its first experience in coal mining. Adani Enterprises is now proposing to build the biggest coal mine complex in Australian history. • Adani Ports acquired AAPCT at the top of the cycle: The port is operating at 40% of stated capacity. In 2012/13 revenues were at US$195m. The Adani family paid a purchase price (equity plus debt) of US$2.2bn, a price equal to 11.5x annual revenues. The gross cashflow yield of AAPCT in 2012/13 was 5.6%, insufficient to cover even the interest costs.
6 Section 1 Introduction: Carmichael Coal Mine and Rail Project
Adani Enterprises purchased the Galilee coal tenement Options for the routing of a rail corridor to either of the ports at Exploration Permit for Coal (EPC) 1690 from Linc Energy Ltd, an Abbot Point or Hay Point include: Australian Stock Exchange (ASX)-listed fossil fuel development 1. Option 1 – from mine site 118km east to the proposed company in August 2010 and EPC 1080 from Mineralogy Pty standard gauge Alpha Railway and then 325km north-east Ltd for A$25m a year later. Adani Enterprises paid Linc Energy to Abbot Point Port (this would utilise some of the 495km A$500m in cash, plus agreed to provide a A$2/tonne coal greenfield rail proposal currently being proposed by GVK royalty (indexed to inflation) on all production for the first twenty Power’s Hancock Coal project); years.iii 2. Option 2 – from the mine site 190km to the existing narrow The Carmichael project comprises two major components: gauge Goonyella system (the “East-West” proposal), 1. A greenfield coal mine (over EPC 1690 and EPC 1080), being connecting 15km south of Moranbah; and both open cut and underground mining, and associated mine 3. Option 3 – from the mine site 70km east and then 300km processing facilities; and north to the Port of Abbot Point via a standard gauge 2. A railway line for the transportation of coal to export facilities greenfield railway (“the North Galilee Basin Rail project”). at either, or both, the Port of Abbot Point (AAPCT) or the Port In addition, depending upon the rail option, two port options are of Hay Point (Dudgeon Point). under consideration for the Carmichael project: The proposed mine is expected to produce 60Mtpa of thermal 1. Option 1 – Export via the Port of Abbot Point; and/or coal during its first 20 years of full production (2020-2039) based on a forecast run-of-mine (ROM)-to-saleable coal yield in 2. Option 2 – Export via the Dudgeon Point expansion at the this period of 81%. Over the proposed 60 year life the project Port of Hay Point. will deliver a forecast average 40Mtpa of saleable coal at a yield of 79%. Export coal from this project is aimed to predominantly service the Indian market, both to Adani Power and other power companies. The coal deposit lease is primarily under the Moray Downs cattle station, 160 km north-west of the town of Clermont in central Queensland. Adani Enterprises acquired this rural property for a reported A$110m in February 2012.iv
7 Section 1
Introduction: Carmichael Coal Mine and Rail Project (Continued)(Continued)
! Map of Carmichael and Queensland ! ! !
r e iv R ! i n rdek u CORAL SEA r B e iv F n R a to n gh n au i H n g AY R W i H Cr v IG CORAL B ee e H RUC k r E Abbot Point Cairns RS HWY DE Burdekin ! IN SEA FL Shire Council Townsville ! ! Bowen ! Charters TowerAbbots Point
B o r g D e Mackay v ie R R i iv e r L R A n B T o R Moranbah U N D C Carmichael E E H M WY Mine P ! O ! L Rockhampton E er Gladstone EV Riv D pine ser N o E r W P ! O Proserpine B
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C x C e d er C r ito C a re r ek e k h w e e k o e l r B k C e k e r Cree p r tto u Su st C k u lic e e Glenden B Po e r C a H n e a C b i r l o S C u e o t V r p t e e o SUTT e r OR DEV r Rive ELOPM k k Righ r ENTAL RD C ee t re r B e C r k a B y u r ll n l u l e B c y C Su h reek ttor iv Riv R e k c r e e a S r sa an C I dy ld Cr E aglefi e eek D ia m o Isaac n d k C Regional Toma e L r h r e o ee awk C g k Council a n C N r o e rth e C k r e ek G
R E Diam G ond ! O C Moranbah Dy R B lling Y r re D o o e e C Carmichael D w Y v r k l ee E n A in k V C E C W re L r R H ek O e I Is e IG a Coal Mine P A Y a k k L c M H R e B W S iv e E - R er r N N EPC 1690 A E C k T W k N e M A B G I h e r N O re re ic L o M D w O C l R ba C e n T L x r K le e D C O O A m o i dd Cr re H E F i e W B e e T P M k k A
R D o k i v Y d e
n e S e
r a r y A l C R LEGEND e T e B l i M
M O Major Watercourse 0 10 20 30 40 Highway k Exe isting Railway nda ee Local Government Area ps C k R Du Cr illi r ee k n h i k P A e N ree N re C B C Secondary Road Coal Exploration Permit NGBR 1km Investigative Carmichael Rail Proposallfe Kilometres s G o A n W H e re Rail Corridor h go Cam p pbell R r Creek te y ! O S Minor Road C ree reek A k Table C D
8 Section 2 Galilee Coal Basin: Background, Challenges and Opportunities
2.1 Galilee Coal Basin Despite these economic challenges a series of new mine projects have moved into the planning stages, initially buoyed by The Galilee Basin in central western Queensland is a vast the recent period of record high coal prices. Figure 1 details the untapped source of predominantly thermal coal estimated to major project proposals across the Galilee Basin, the stated size contain tens of billions of tonnes of resource. and capital cost and proponents. A number of these projects The lower than benchmark energy content, high ash, high strip have been in planning and approval stages for a number ratios, distance to ports and significant levels of overburden all of years. However, the magnitude of financial capital and undermine project economics and explain why no Australian infrastructure required, coupled with a depressed thermal coal mining firm has ever developed a project here. market outlook make opening up the Galilee basin a challenging and high risk proposition. “The Galilee Basin is located 200km to To add 313Mtpa of new supply to the global seaborne thermal coal market (828Mt in 2012) would represent a greater than the west of the Bowen Basin and contains 30% increase in global supply from this single basin. This is well large deposits of high-volatile, low sulphur in-excess of any medium term demand growth projections. thermal coal. The remote location and a Projects continue to suffer delays and deferment. For example, corresponding lack of supporting regional the Brazilian mining giant, Vale S.A., having written down its infrastructure including water, power and Australian coal assets by US$1bn in 2013, announced in July historic low thermal coal prices have 2013 its plan to sell the Degulla thermal coal project in the Galilee Basin.vi Other would-be Galilee developers such as GVK continued to make development of the and Waratah Coal are considerably behind schedule. Galilee Basin sub economic.”
Bede Boyle, December 2010v
Figure 1: The Galilee Coal Basin – Proposed Projects Targeted net coal Owner Project Type Status Capex (A$bn) output Mtpa Adani Group (India) Carmichael Coal Open cut & U/G EIS active 60 7.1 GVK Coal (India) Alpha Open cut BFS Complete 30 10.0 Alpha West Underground PFS 24 Kevin’s Corner Open cut & U/G EIS complete 30 4.2 Waratah Coal P/L (Clive Palmer) China First Open cut & U/G EIS active 40 8.8 Alpha North Open cut & U/G Pre-EIS 40 n.a. AMCI Group & Bandanna Energy South Galilee Coal Open cut & U/G EIS active 14 42 Ltd JV Macmines Austasia Pty Ltd (1) China Stone Open cut & U/G EIS being prepared 45 n.a. Vale SA (Brazil) Degulla Open cut & U/G Pre-EIS, for sale 30 8.0 Galilee Basin - Total 313 42.3 (1) Owned by the private Chinese family business, the Meijin Energy Group.
9 Section 3 Adani Group: Background, Challenges and Opportunities
3.1 Conglomerate structure 1. Adani Enterprises Limited; 2. Adani Ports & Special Economic Zones Limited; and The Adani Group was formed in 1988 and has grown 3. Adani Power Limited. rapidly to become one of the leading Indian family-controlled conglomerates across a multitude of businesses. The origin The Adani Group has a significant business presence in India of this structure is based around the successful Mundra Port across its operations. In 2012/13, the Adani Group was involved in the Indian state of Gujarat. Having built the largest private in trading 46Mt of coal, representing some 33% of India’s total port in India from a standing start in only 25 years, the Group coal imports for the year. Adani Enterprises also produced 4Mt has expanded vertically and horizontally. The Group now of thermal coal in Indonesia, operated 7,260 megawatts (MW) of operates in power generation and distribution, transportation coal-fired power generating assets in India and handled 91 million and warehousing, property development, coal trading and more metric tonnes (MMT) of cargo across its three Indian ports. recently coal mining. Having facilitated the import and export of In relation to the key business units discussed in this report, the a number of commodities in India via Mundra Port, the Group private family group owns the Adani Abbot Point Coal Terminal then moved into trading and/or production of a number of (AAPCT) in Queensland, Australia (acquired from Adani Ports these, as diverse as bulk grains, coal, shipping fuels and edible in March 2013). The Adani family also owns 76.5% of Adani cooking oils. Enterprises, which in turn owns a 75% stake in Adani Ports and The Adani Group comprises a number of unlisted Adani a 69% interest in Adani Power (members of the Adani family own family-owned businesses and majority ownership of three listed another 6% of Adani Power directly). Adani Enterprises owns the companies, which have a cascade ownership structure: Adani Group’s coal mining and trading interests, including the Carmichael deposit in Queensland, Australia – Figure 2.
Figure 2: The Adani Group Structure
10 Section 3
Adani Group: Background, Challenges and Opportunities (Continued)
The Adani Group … substantially smaller than it appears The total external market capitalisation has dropped 21% or US$1.37bn since 27 February 2013 to now be US$5.17bn – It is of concern that Adani Enterprises has made a number of Figure 3.ix The consolidated net external debt of the listed Adani representations as to its size as a justification for its extensive Enterprises is US$10.35bn, or over US$12bn if the estimated capex profile, stating it has a “market capitalisation of US$30bn” net debt in AAPCT is included – refer Section 5.3. and “projected investment of US$25bn in the next five years”.vii As a consolidated group entity, Adani Enterprises’ US$10.35bn The more subdued claim by Adani Enterprises that “the market of net debt already incorporates the US$1.25bn of net debt in capitalisation of the Adani Group was US$12bn as at February the majority owned Adani Ports and US$6.55bn of debt in Adani 27, 2013”viii is an overstatement of the combined group’s equity Power. As such, saying the Adani Group’s total net debt is the capitalisation. The inflated figures for the size of the Adani sum of the three i.e. US$18.15bn is also double counting, just Group are based on the combined market capitalisations of the as saying the group’s total market capitalisation is US$9.89bn. three Adani listed entities: Adani Enterprises, Adani Ports and Adani Power. This double counts the market capitalisation due Consolidated group net debt is US$10.35bn, and the total to cross-shareholdings. The market value of the 75% share of external market capitalisation of the three listed Adani firms equity owned in Adani Ports and 69% share of equity in Adani is US$5.17bn. This is substantially smaller than the various Power is implicitly already included in the market value of equity company claims of US$30bn or US$12bn. in Adani Enterprises, the listed holding company.
Figure 3: Equity and Net Debt Capitalisation of the Adani Group (US$bn) External Market US$bn Rs Market Cap. Cross-holding Net Debt (1) & (2) Cap. Adani Enterprises Rs193.60 US$3.46 US$3.46 US$10.35 Adani Ports Rs144.35 US$4.86 75.0% US$1.22 US$1.25 Adani Power Rs33.45 US$1.56 69.0% US$0.48 US$6.55 Total US$9.89 US$5.17 US$18.15 (1) Excludes the debt of ~US$1.95bn attached to AAPCT and any other debt in the Adani family group of companies. (2) Net debt is calculated using consensus forecast for 31 March 2014 so as to reflect the Adani Ports equity raising of Rs10bn (US$180m) in June 2013 and Adani Power raising in May 2013 of Rs25bn (US$456m). Consensus forecasts accessed 27 October 2013 from Thomson Reuters Analytics.
11 Section 3
Adani Group: Background, Challenges and Opportunities (Continued)
3.2 Adani Enterprises Adani Enterprises is the listed flagship of the Adani Group and listed in 1994 at Rs150 per share (ps). Adani Enterprises’ key asset is a 75% stake in Adani Ports, with a secondary asset being a 69% shareholding in Adani Power. Adani Enterprises also operates the coal trading and mining businesses of the Adani Group. In 2012/13 Adani Enterprises’ trading division imported 46Mt of coal into India. Adani Enterprises holds a 100% ownership of the Carmichael project in Australia. Adani Enterprises entered the coal mining business in 2008 with the purchase of a coal deposit in Bunyu, Indonesia. Against a current market capitalisation of US$3.46bn, Adani Enterprises had a consolidated group net debt of US$10.35bn as of March 2013. The high level of financial gearing couples with Adani Enterprises’ heavy investment in the underperforming Adani Power business, such that the share price is down 72% in absolute terms and down some 50% relative to the Bombay Stock Exchange (BSE) index in the last three years – Figure 4.
Figure 4: Share Price Performance – Adani Enterprises
Source: http://au.finance.yahoo.com
12 Section 3
Adani Group: Background, Challenges and Opportunities (Continued)
3.3 Adani Power Adani Power listed on the BSE in Aug 2009 at Rs100ps. Adani Power has grown rapidly from a standing start in 2009 The stock price has fallen 66% since then to Rs33.45ps, – with the huge Mundra facility the company’s first experience underperforming the BSE by almost 70% over the last four in power generation. The company has massively ambitious years – Figure 5. Adani Power did a selective equity raising plans to grow from zero capacity in 2009 to 20,000 MW by in May 2013 at Rs53ps, supported by Adani Enterprises and 2020. However, Adani Power has been beset by operational the Adani family. This expanded issued capital by 20% and and financial issues – with its plants operating at only 63% raised Rs25bn (US$456m). The stock is down 30% since this of capacity in 2012/13 and the firm’s net debt blowing out to latest raising. Adani Power’s market capitalisation of equity is US$6.55bn, some 400% of its current equity capitalisation US$1.56bn. (even after a massive equity raising in May 2013). A mismatch of rupee revenues and US$ costs have decimated profit margins. Adani Power’s key business is coal-fired electricity generation, We discuss these factors in Section 4.3. with 7,260 MW of operational capacity as at September 2013. The key unit is the fully operational 4,620 MW Mundra coal-fired power station in Gujarat. The second largest asset is the Tiroda coal-fired power station in Maharashtra with a design capacity of 3,300 MW, half of which is being commissioned in 2013/14. A third coal-fired facility at Kawai in Rajasthan of 1,320 MW is under construction. Adani Power also owns and operates four transmission lines of 2,923km in total.
Figure 5: Share Price Performance – Adani Power Since IPO
Source: http://au.finance.yahoo.com
13 Section 3
Adani Group: Background, Challenges and Opportunities (Continued)
3.4 Adani Ports Adani Ports has vertically integrated in India, building up operations in rail, trucking, pipelines and warehouses to Adani Ports is the strongest business within the Adani Group, distribute freight. Mundra Port provides coal importation for with an equity market capitalisation of US$4.86bn and a five Adani Power’s 4,620 MW Mundra power station and the Tata year track record of outperforming the Bombay Stock Exchange Group’s 4,000 MW Mundra power station. (BSE) Index – Figure 6. Adani Ports floated in 2007. Adani Ports acquired a 99-year lease over the AAPCT T1 in The key asset of Adani Ports is the Mundra bulk, container and Queensland, Australia, in May 2011 for A$1.83bn (equivalent to crude cargo port in Gujarat with a stated cargo capacity of Rs8,600 crore/US$1.9bn at the time), but excessive financial 200Mtpa. Adani Ports built this port as a greenfield development, leverage saw AAPCT transferred from Adani Ports to a private commissioning it in 2004. It has since been expanded to become offshore unit of the Adani family in March 2013. This is the the largest privately owned port in India. In 2012 Adani Ports first and only port outside of India that Adani Ports has owned commissioned two new facilities, the 100% owned 70Mtpa Hazira and operated. Three further ports in India at Mormugao (74% and the 74% owned 20Mtpa Dahej ports. In 2012/13 Adani Ports’ owned), Vizag (100% owned) and Kandla (51% owned) are total volume handled was reported at 91Mt (+38% year-on-year, under construction – refer Section 3.6. “yoy”), giving a capacity utilisation rate of 55% - whereas most major ports on India’s west coast are running at an average 100% utilisation. Mundra port is the second largest port in India.
Figure 6: Share Price Performance – Adani Ports
Source: http://au.finance.yahoo.com
14 Section 3
Adani Group: Background, Challenges and Opportunities (Continued)
3.5 A conglomerate structure … Figure 7: Adani’s Proposed Australian Investment now adding geographic and financial Purchase of Carmichael Coal from Linc Energy 500 complexity Purchase of EPC 1080 from Mineralogy Pty Ltd 25 Purchase of Moray Downs 110 Since being formed in 1988, the Adani Group has been Mine development 5,490 ambitious and relentless in its expansion plans, building a Transmission line - 250km to Strathmore 300 succession of greenfield developments across a myriad of somewhat related businesses spanning ports, railways, coal Rail development 1,200 mining, coal-fired power generation, solar generation, electricity Purchase of Abbot Point Coal Terminal - T1 1,829 transmission, gas distribution, industrial special economic zones Adani Abbot Point Coal Terminal - T0 1,000 and agricultural commodities. This is a truly conglomerate Total proposed investment (A$m) 10,454 group of businesses across India, with more recent international expansions in Indonesia (coal mining, 2008) and Australia (ports, Invested to-date coal and rail, since 2009). Purchase of Carmichael Coal from Linc Energy 500 While there are exceptions, in the view of the authors, many Purchase of EPC 1080 from Mineralogy Pty Ltd 25 conglomerates have a history of underperforming their non- Purchase of Moray Downs 110 conglomerate peers due to their structural complexity and Estimated Mine Capex post purchase 250 the resulting inability of senior management and the board to Purchase of Abbot Point Coal Terminal - T1 1,829 fully understand the multitude of business dynamics. A key Estimated T1 Port Capex post purchase 88 factor is diversification – while bringing a natural hedge of Total To-Date 2,802 different business cycles, it more critically brings an operational, managerial, financial and legal complexity that particularly emerges when a firm takes a core strength in its domestic market and tries to rapidly expand this internationally across a number of different business streams concurrently. From a relatively successful domestic base in India, the Adani Group is in the process of developing a A$10.5bn portfolio of largely greenfield projects across a range of businesses in Australia – Figure 7. This involves a significant number of management, political, financial, legal, environmental and operational challenges, particularly for a firm that did not have an operational asset in Australia until June 2011. Having invested A$2.8bn to date, there remains a huge investment in capital, interest expense and time before any sizeable earnings are possible.
15 Section 3
Adani Group: Background, Challenges and Opportunities (Continued)
3.6 Massive pipeline of projects … At Adani Ports, the Group has three ports in operation, with plans to commission another three ports at Mormugao, Vizag capex of US$25bn and Kandla across India over the next three years. At the same The Adani Group has a massive pipeline of projects underway time Adani Ports is expanding Mundra’s capacity by more than – in ports, in power stations, in mining and in Australia. The 20% to 245Mtpa, despite the three existing ports operating Adani Group has stated a target to become one of the largest below 50% utilisation in 2012/13.xiv coal mining, coal trading, power generating and cargo port In Australia, the Adani family has acquired the long-term lease companies in the world – all concurrently by 2020. This involves for a 50Mtpa coal export port terminal at Abbot Point, which a target to expand volumes at a double-digit rate every year in continues to operate below 40% utilisation since its purchase in each of the many different major businesses – Figure 8. June 2011. The Adani Group proposes adding another 70Mtpa Adani Enterprises has stated this involves capital expenditure of capacity over two stages at Abbot Point (Terminal 0 project), plans of upwards of US$25bn in the next five yearsxi – all plus a three-stage 90Mtpa greenfield development at Dudgeon to be funded by the Adani Group with a combined external Point (now on hold). Adani Enterprises also proposes to build a equity market capitalisation of US$5.17bn. This involves very greenfield railway line for A$1-2bn. significant operational and construction risks and is likely to In addition, in India the Adani Group is expanding into solar involve a significantly increased level of financial leverage from generation, power transmission, gas distribution, warehousing, already elevated levels – refer Section 3.7. railways and special economic zone (SEZ) industrial parks. By 2015 Adani Enterprises plans to commission four greenfield The Adani Group has an extremely bold plan of concurrent and coal mines in India with a peak capacity of 110Mtpa, an aggressive expansion across a multitude of industries, which will increase from zero in 2012/13. Adani Enterprises also plans be largely debt-funded given the limited current profitability across to concurrently triple its Indonesian coal production and build the Group. the greenfield 60Mtpa Carmichael project in Queensland – the biggest coal project in Australian history. In 2012/13 alone Adani Enterprises capitalised exploration, evaluation and other costs of A$186m relating to the Carmichael project (A$63m in 2011/12), despite construction not having even started as yet.xiii In power generation, Adani Power commissioned its first coal-fired unit in 2009. As of March 2013, Adani Power had 7,260MW operational, with another 1,980 MW under construction. Beyond this, Adani Power has stated it plans to double capacity again in the following seven years, despite net debts of US$6.55bn against an equity capitalisation of US$1.56bn, and its loss-making status.
Figure 8: Bold, or reckless expansion?
CAGR Year to 31 March 2011 2012 2013 2020 2020 vs’13 Coal Mining (Mtpa) 3 2 4 200 75% Coal Trading (Mtpa) 33 36 46 100 12% Power Generation (MW) 4,620 4,620 7,300 20,000 15% Port Cargo (MMT) 52 66 91 200 12% Source: Adani Group Presentation, August 2013xii
16 Section 3
Adani Group: Background, Challenges and Opportunities (Continued)
3.7 Debt profile … excessive Figure 10: The Rise of the Adani Group’s Net Debt Over the Last Five Years (by listed entity) indebtedness
The Adani Group has some strong operating business divisions 80,000 generating consistent operating profits, particularly in Mundra Port, Adani Abbot 70,000 AAPCT and in coal trading. However, the Group as a whole has Point experienced a rapid rise in net indebtedness – from Rs9 crore as at 60,000 Adani Enterprises 31 March 2009 to Rs75 crore as at 31 March 2013. In US$ terms, 50,000 (ex-‐listed this is a rise from US$1.9bn as at 31 March 2009 to US$12.0bn subsidiaries) 40,000 (using the prevailing spot rate in March 2009 and 2013 of Rs50.5 Adani Power and Rs54.2/US$1 respectively). We calculate this by adding the 30,000 Net Debt Rs crores Adani Ports estimated US$1.9bn of debt in AAPCT taken off balance sheet on 20,000 31 March 2013 from Adani Ports into the private family structure 10,000 to lower the net debt as reported in the consolidated accounts of 0 Adani Enterprises and Adani Ports – Figure 9. 2009 2010 2011 2012 2013 2014E Consensus forecasts for Adani Enterprises have net debt stabilising at March 2013 levels over the current year to March 2014 – Figure 10. This looks optimistic in our analysis, despite the two equity raisings (US$180m in Adani Ports in June 2013 and US$456m in Adani Power in May 2013), given the adverse impact on translation of US$ denominated debt (refer Section 4.3), the continued high levels of capex and ongoing losses in Adani Power.
Figure 9: Adani Enterprises – Net Debt (breaking out share by listed entity)
31 March (Rs crores) 2009 2010 2011 2012 2013 2014 Est Long term borrowings 12,084 17,439 24,253 48,894 48,850 Current maturities of LT debt 0 0 2469 4216 7,664 Short term borrowings 0 0 6,349 16,337 12,912 Cash -2,583 -2,919 -2,653 -6,514 -7,074 Non-current bank balances 0 -43 -318 -457 0 ST Loans and advances -46 -63 0 0 0 Net Debt 9,456 14,414 30,099 62,476 62,352 63,629
Share holders equity 3,019 6,038 17,727 19,490 21,459 24,052 Net Debt to BV Equity 313% 239% 170% 321% 291% 265% Net Debt for Group 9,456 14,414 30,099 62,476 62,352 63,629
31 March (Rs Crores) 2009 2010 2011 2012 2013 2014E By group of companies: Adani Ports 1,601 2,402 3,174 16,280 9,378 7,682 Adani Power 4,282 9,271 23,159 34,933 40,226 40,229 Adani Enterprises 3,573 2,742 3,767 11,262 12,748 15,718 (ex-listed subsidiaries) Adani Abbot Point 12,282 12,282 Total Net Debt - Adani Group 9,456 14,414 30,099 62,476 74,635 75,912 Source: Annual Reports for Adani Enterprises, Adani Ports and Adani Power 2009-2013, plus consensus estimates drawn from Thomson Reuters Analytics (27 October 2013)
17 Section 3
Adani Group: Background, Challenges and Opportunities (Continued)
For a group with such aggressive international expansion plans, Figure 11: Adani Enterprises – Net interest Expense and net debt of US$12bn and rising is both a major constraint and Net interest cover risk factor. To show the financial leverage another way, the net Year to 31 March 2012 2013 interest cover of Adani Enterprises was 1.7 times in 2012/13, a (Rs Crores) material deterioration from the already low 2.7 times in 2011/12. Interest Expense 1,826 3,493 This means that 59% of all operating earnings in 2012/13 went Interest Income -393 -560 to service the interest on debts accumulated – Figure 11. After Net Finance Costs 1,432 2,933 capex there is no free operating cashflow to fund dividends or to cover for unexpected contingencies. Operating profit (EBIT) 3,929 4,939 Further, this calculation excludes the entire interest expense associated with the purchase and development of the Carmichael project (an investment of A$782m and rising), with EBIT / Net interest (times) 2.7 1.7 over A$28m of interest expense capitalised in 2012/13 alone. Net interest as a % of EBIT 36% 59% We note that Adani Enterprises charges interest expense to Source: Annual Report for Adani Enterprises 2012/13 its Australian Adani Mining Pty Ltd (Adani Mining) subsidiary at LIBOR +4.25-4.75%, well above Adani Mining’s external bank loan rates of LIBOR +3.0-3.5%. Given Adani Mining is a loss- Figure 12: Adani Power – Net Interest Expense and Net making entity and the Adani Group has not paid and is unlikely Interest Cover to pay any corporate tax in Australia in the near future, the Year to 31 March 2012 2013 2014 question of transfer pricing is unlikely to be raised. (Rs Crores) 1H annualised The financial profile of Adani Power is significantly more tenuous Interest Expense 884 1,703 4,164 that that of Adani Enterprises. The net interest cover of Adani Interest Income -142 -155 -155 Power was negative in 2012/13, reflective of the operating loss Net Finance Costs 742 1,547 4,008 before interest and tax costs were booked. This was a material deterioration from the already very low interest in 2011/12 Operating profit (EBIT) 743 -295 -145 which saw operating profit equal to interest costs. The trend has deteriorated further in the six months to September 2013 – Figure 12. EBIT / Net interest (times) 1.0 -0.2 0.0 Net interest as a % of EBIT 100% -525% -2769% As a standalone entity, Adani Ports has a relatively strong balance sheet following the sale of AAPCT to the Adani family’s Cash Interest Expense 884 1,703 n.a. private group in March 2013 and the US$180m institutional equity raising in June 2013. Sources: Annual Report for Adani Power 2012/13, Adani Power Interim 2014 result.
18 Section 4
Structural Problems at Adani Power
4.1 Adani Power: increased debt, lower The Adani Power 2012/13 annual report (page 13) states: profits and market value of equity As detailed in Figure 5 above, Adani Power’s share price has “The biggest grievance of private sector declined 68% over the last four years. Excessive financial leverage has been the long process of clearances, has been a key cause of this underperformance, with investors securing fuel linkages and delays in land shying away from debt-laden companies developing non- acquisition. Inadequate domestic supply economic power projects. However, other factors have also been material contributors, including: the inability to access domestic of quality fuel, viz. coal and gas results in Indian coal supplies; a failure to hedge US$ coal import costs higher costs of generation. Additionally, against long-term fixed price power purchase agreements written due to transportation bottlenecks at ports, in rupee terms; lower than forecast capacity utilisation rates; high prices of imported coal, volatility in environmental, social and regulatory challenges and delays; and an excessively ambitious project commissioning pipeline relative to the exchange rates and demand for expensive inexperience of promoters. power, the imported coal may not fully The Adani Power 2011/12 annual report (page 12) states: cover deficit of domestic coal.”
Adani Power – excessive financial leverage “Power project implementation is a herculean task considering various Figure 13 details the progressive rise of net debt to equity from 187% in 2008/09 to 937% by 2012/13. The Rs25bn (US$456m) clearances from statutory authorities, land equity raising by Adani Power in May 2013 was funded by Adani acquisition, rehabilitation and resettlement Enterprises and a member of the Adani family, lifting issued issues, local protests, funding availability share capital 20% in the process. This raising will cover the net due to sectorial exposure norms, scarcity of losses of Rs23bn in 2012/13, but even with a reduced loss in 2013/14 forecast, Adani Power continues to suffer financial skilled manpower, the lack of bankable fuel distress and rising net debt ratios. tie ups and sluggish project implementation.”
Figure 13: Adani Power - Net Debt to Equity
31 March (Rs Crores / 10 million) 2009 2010 2011 2012 2013 Sept’13 Long term borrowings 4,990 10,586 21,688 29,585 33,192 34,852 Current maturities of LT debt 0 0 810 2,595 4,341 5,756 Short term borrowings 0 0 2,005 6,420 4,411 4,411 Cash -558 -1,165 -964 -3,241 -1,718 -1,455 Non-current bank balances 0 0 -291 -426 0 0 ST Loans and advances -150 -150 -89 0 0 0 Net Debt 4,282 9,271 23,159 34,933 40,226 43,565
Share holders equity 2,294 5,778 6,287 6,041 4,293 4,565
Net Debt to BV Equity 187% 160% 368% 578% 937% 954% Source: Annual Reports for Adani Power 2009-2013 19 Section 4
Structural Problems at Adani Power (continued)
Adani Power – low power plant utilisation rates Adani Power – inability to source low priced domestic Indian coal Lack of fuel supply and the associated infrastructure bottlenecks have been a major obstacle to the successful and profitable A key pressure point has been the inability to source sufficient operation of Indian thermal power plants, even once financing domestic Indian coal, resulting in either a sub-optimal operating and commissioning have been overcome. Adani Power reported rate for the power plant and/or the added cost of sourcing a capacity utilisation rate of 62% in 2Q2013/14 and 63% in imported coal at a significantly more expensive delivered 2012/13, down from 69% in 2011/12. cost. Adani Enterprises has been unable to develop its captive domestic coal block allocations, and coal supply from Adani Enterprises’ Indonesian coal mine continues to run well “Power projects today are stalled not below expectations. The sustained cost differential between because of lack of credit but because of domestic and imported coal is illustrated in Figure 14. The major lack of supply of fuel and uncertainties devaluation of the Indian rupee against the US$ has only made with regard to coal pricing and power this differential more pronounced in 2013 – as discussed in Section 4.3. tariffs, towards which the government has recently taken some measures.” K.C. Chakrabarty, deputy governor of RBI, 9 August 2013
Figure 14: Coal Price Movements – Domestic India vs Key Import Benchmarks
# Indian benchmark D grade coal GCV range 5,200-5,500kcal/kg (conversion at Rs50/USD) Source:, PwC, ’The Indian Coal Sector – Challenges and future outlook’, India Chamber of Commerce, November 2012.
20 Section 4
Structural Problems at Adani Power (continued)
Adani Power – long-term off-take pricing contracts at operators have combined with major greenfield project excessively low prices commissioning delays to drain sector profitability and restrict finance availability. Like numerous other power producers in India, Adani Power signed a multitude of long-term power supply contracts in It is not only the more established power sector operators which 2007-2009 at electricity prices that have subsequently proven have been affected. The Economic Times reported that an uncommercial for the power generator. Adani Power failed to estimated 35-50 gigawatts(GW) of thermal power projects at lock in enforceable domestic coal fuel supply contracts from various stages of development in India are for sale, many being Coal India Ltd or elsewhere. The tender process also meant developed by firms outside their core area of competency. Having Adani Power was unable to structure its contracts such that entered the sector over the last five years on the expectation that if Coal India Ltd was unable to deliver, Adani Power has the a growing electricity demand profile would provide opportunity contractual right to adjust its supply pricing to reflect higher and profits for all, promoters are now trying to exit their projects, priced US$ denominated coal imports as a substitute. along with the contingent liabilities and debt burdens. Adani Power is challenging the validity or sustainability of a One stated objective of the Carmichael project is to supply number of its fixed price power purchase agreements, which thermal coal into the Indian power market. We see this as a have terms of up to 25 years. In 2012 Adani Power entered a flawed strategy, given the conflicting dynamics of India. The plea in the Indian Supreme Court to terminate a legal contract government has provided massive subsidies to fossil fuel prices to supply Gujarat Urja Vikas Nigam Ltd with power from 1,000 and state governments have held down electricity prices in MW of capacity for 25 years at a levelised tariff of Rs2.35 per an attempt to hold down inflation, but the former has pushed unit,xix some 45% below the Rs4.45 per unit average wholesale the government into a massive budget deficit. The importation merchant price of electricity cost in India in mid 2013. Adani of the majority of India’s fossil fuel needs (oil, kerosene and Power’s 2Q2013/14 result detailed its average fuel cost was cooking gas, and, increasingly, coal) has resulted in a massive Rs2.40/unit. This leaves no margin for depreciation, operating trade deficit. Over only three years, India has seen coal imports or financing costs. Recent hearings of the Central Electricity rise from 9.9% of total domestic consumption in 2009-10 to Regulatory Commission highlight the precedent that would be 19.3% in 2012-13 – Figure 15. set in overturning a legally binding contract due to terms that This in turn has seen the rupee devalue by 30% against the US$ have proven onerous after the event. xx in three years, putting upward pressure on consumer inflation, which is currently running at 9% pa. With almost all aspects of the electricity system carrying excessive financial leverage, 4.2 The Indian electricity sector most coal and electricity companies have seen their profit base We view the current state of the Indian power market as fatally eroded and suffered sustained share market underperformance. flawed. Commercial returns across the sector have not been The controversy over government coal allocations to private achieved in recent years, as evidenced by the declining share companies , dubbed “Coalgate”, and uncertainty around actual market values of companies including Adani Power, Adani extractable reserves has seen the production of domestic Enterprises, GVK Power & Infrastructure, Reliance Power and thermal coal significantly below the government targets for Tata Power. Excessive debt and expansion by inexperienced a number of years. Importing even more US$ denominated
Figure 15: Indian Coal Consumption – Domestic vs Imports
Domestic Total Coal Indian Imports as a Indian Indian Imports Year Production Import Bill Demand % of total coal Demand Chg GDP chg (Mt) (Mt) (Rs Crore) (Mt) consumption (yoy) (yoy) 2009-10 489.0 54.0 39,180 543.0 9.9% 10.1% 8.0% 2010-11 476.0 67.0 41,550 543.0 12.3% 0.0% 8.4% 2011-12 481.0 92.0 78,837 573.0 16.1% 5.5% 6.5% 2012-13 492.0 118.0 81,013 610.0 19.3% 6.5% 5.0% 2013-14 (f) 4.0% (1) (1) HSBC forecast - 2 September 2013 Source: Salva Report, 29 July 2013
21 Section 4
Structural Problems at Adani Power (continued)
thermal coal is not a clear solution, and this solution will only be the Adani Group’s inability to successfully develop various made worse by port, rail and grid infrastructure bottlenecks. domestic Indian coal deposits allocated by the Government. India’s energy sector also suffers from an inability to align the 2. The Adani Group has taken out significant USD and AUD price of electricity with the costs of producing it. The regulatory foreign currency loans against its overseas purchases. So processes in India have, in response to political pressure, kept while there is a natural balance sheet hedge in terms of electricity prices low to the detriment of power providers and foreign currency assets, the interest servicing requirements other energy interests. According to India’s five-year plan a new, of the loans will strain the Adani Group whilst the projects are rational pricing structure with significant increases in prices and/ pre-revenue (for example, the Carmichael project) or running or subsidisation is essential under current energy scenarios. This well below full capacity (for example, AAPCT). The Adani price restructuring is seen as a major challenge. Enterprises’ 2012/13 annual report states there were loans relating to AAPCT of US$800m from the State Bank of India. In addition, India’s Power Finance Corporation issues requests xxvi In addition, as of 31 March 2012 AAPCT had US$1.15bn for new power plant proposals with associated coal block of AUD loans, giving a total indebtedness in AAPCT of allocations without first scoping the environmental suitability US$1.95bn.xxvii of the coal blocks. As a result, another arm of the Indian government, the Ministry of Environment and Forests (MoEF) 3. On an enterprise-wide basis Adani Enterprises’ currency can subsequently refuse mining permission, classifying the block exposure is considerable given its other unhedged foreign as “no-go” due to potential environmental damage, particularly loans in its funding mix. Adani Enterprises’ consolidated in rich forest areas or endangered species habitat. This was the accounts show net unhedged foreign currency loans of over case with the proposed 4,000MW ultra mega power projects US$5.8bn as at 31 March 2013. (UMPPs) at Surguja in Chhattisgarh in October 2013. Indeed, On this US$5.8bn of foreign currency loans not covered by this situation of investments being made in power plants derivatives, the impact of the greater than 10% depreciation and coal mines without appropriate prior environmental and since balance date is around US$580m in terms of additional social screening has resulted in many projects either getting rupee denominated debt on translation held on Adani significantly delayed or even scrapped. Enterprises’ balance sheet. A key area of concern is the exceptionally high level of debt Mr Gautam Adani, Chairman of the Adani Group, stated: in the multitude of state-owned electricity distributors, which have run at ongoing losses due to electricity theft, transmission losses (due to out-dated transmission and distribution assets) “Under our internal analysis at group and below-cost power tariffs. The political opposition to higher level, over the next three to five years, electricity prices is a key impediment. This in turn impedes the ability of power generators to raise long-term finance due to once a part of loans are repaid, we would the absence of credit-worthy power purchase agreements at have a positive impact if there were to be commercial rates. continued depreciation of the rupee.”xxx
This suggests a number of steps are now being undertaken to 4.3 Impact of the rupee collapse … hedge any further foreign currency impact, albeit after the 20% US$ debts devaluation of the last 18 months has already impacted. We would also expect that the Adani Group’s ability to refinance The Indian rupee has depreciated by 10% since Adani US$1.5-2.0bn of existing loans in the international financial Enterprises’ 31 March 2013 year end (when it was Rs54.3/ markets will also be significantly more difficult. Adani Enterprises US$), and at the time of this report sits at Rs61.4 to the USD. will capitalise most of this additional interest expense, given it is This puts the rupee down almost 20% versus 31 March 2012 held against projects yet to be commissioned. at which time the rupee/USD was 51.1 – Figure 16. The Adani Group has a number of exposures to the fall in the rupee. The three most significant impacts are all negative: 1. Adani Power has electricity power purchase agreements (PPA) priced in rupee terms, but its imported coal input costs are priced in USD. This exposure is materially higher than was planned by Adani Power on signing the PPAs due to
22 Section 4
Structural Problems at Adani Power (continued)
Figure 16: USD/INR Exchange Rate: 2004-2013xxix
Source: XE.com
23 Section 5
Abbot Point Coal Terminal
5.1 Adani Abbot Point Coal Terminal – An ongoing issue with the AAPCT is the inability of this coal export terminal to deliver on its 50Mtpa rated capacity. As project overview Figure 18 shows, throughput at AAPCT has consistently been In June 2011 Adani Port acquired a 99-year lease over below 40% of rated capacity since 2010, running at 16-19Mtpa the established Abbot Point Coal Terminal (T1), a 50Mtpa of volume. The Adani Group recently highlighted the trend of capacity coal export facility, 25km to the north-west of Bowen improvement, with the moving annual total of throughput in in Queensland – Figure 17. The port includes rail in-loading September 2013 at 19Mtpa, a record for the port but still only facilities, coal handling and stockpiling areas. A single trestle 39% utilisation. The Adani Group has consistently said the port’s jetty and conveyor connects to two offshore berths and two entire 50Mtpa of capacity is fully contracted, stating in June shiploaders 2.8km offshore. Adani Ports paid A$1.829bn to the 2012: “Long term Take or Pay agreements for entire 50Mtpa Queensland Government for this lease. signed.”xxxii The AAPCT’s value was strategically enhanced by Aurizon’s The entire Queensland coal industry until recently has stated Goonyella to Abbot Point Expansion (GAPE) project, a A$1.1bn it is constrained due to port capacity limitations, justifying a railway expansion completed in December 2011. The GAPE multitude of new coal export terminal plans – Figure 20. This is project involved the construction of the “Northern Missing Link” of a risk for AAPCT’s valuation, given increased coal port supply 69km to connect the Newlands and Goonyella coal rail systems, is planned to come online at a time of weaker than expected and doubled rail coal capacity to Abbot Point to 50Mtpa. demand. Queensland’s coal port utilisation averaged 63% over 2010-2012.xxxiii The Queensland Government in November 2013 declared the Port of Abbot Point one of the five Priority Port Development Areas in Queensland.
Figure 17: AAPCT – Coal Stockpile, Rail Link and Pier to T1
Source: Greenpeace/Tom Jefferson - beyondcoalandgasxxxi
24 Section 5
Abbot Point Coal Terminal (continued)
FigureFigure 18: AAPCT 18: AAPCT– Throughput – of Coal Exports (June year end) Throughput of Coal Exports (June year end) 20
16
12
8 Million tpa
4
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: North Queensland Bulk Ports Corporation
The totalFigure Queensland 24: Galilee coal export Basin port to capacity APCT (coking– and thermalIncremental combined) in 2013Economic is around Cost 264Mtpa of Rail – Figure 19. The 40Dalrymple Bay Coal Terminal at 85Mtpa, owned by the Canadian-listed Brookfield Infrastructure Group, is rated as the 35third largest coal export port in the world, with the Port of Gladstone30 at 75Mtpa rated as the fourth largest. Should AAPCT move towards full utilisation of its 50Mtpa rated capacity, this 25 would put it as one of the world’s largest coal export terminals. 20
Figure15 19: Queensland Ports for Exporting Coal
Economic Cost ($tonne) Coal Capacity 10 Port Asset Description Owner Operator / Leasee (Mtpa) 5 Abbot5 Point10 15 20 Abbot25 Point30 Coal35 Terminal40 45 50North55 Queensland60 Bulk Ports The Adani Group (99 year 50 Incremental Tonnes (millions) Corp. Ltd lease) Hay Point Hay Point Services Coal Terminal BHP Billiton-Mitsubishi Alli- Hay Point Services Coal 44 ance (BMA) Terminal(1) Hay Point Dalrymple Bay Coal Terminal North Queensland Bulk Ports DBCT P/L(2) (99 year lease 85 Corp. Ltd to 2100) Hay Point Dudgeon Point expansion - on hold Adani Group / Brookfield Nil Nil Infrastructure Group Brisbane Fisherman Islands Coal Terminal Queensland Bulk Handling Port of Brisbane Pty Ltd(3) 10 (New Hope Coal) (99 year lease) Gladstone RG Tanna Coal Terminal Gladstone Ports Corp. Gladstone Ports Corp. 68 Gladstone Barney Point Coal Terminal(4) Gladstone Ports Corp. Gladstone Ports Corp. 7 Gladstone Wiggins Island Coal Export Terminal Gladstone Ports Corp. Gladstone Ports Corp.(5) Nil (WICET) (27Mtpa target) Total Queensland Coal Export Capacity - 2013 264 (1) BMA is upgrading the Hay Point terminal by 11Mtpa to 55Mtpa, completion due April 2014. Aurizon is supporting this with a $130m Goonyella System rail upgrade. (2) Dalrymple Bay Coal Terminal Pty Ltd (DBCT) is the Australian subsidary of the Canadian listed Brookfield Asset Management Limited. (3) The Port of Brisbane is jointly owned by IFM, QIC, Global Infrastructure Partners and Abu Dhabi Investment Authority. (4) Gladstone Port’s Barney Point Coal Terminal is in the process of being converted to other products (5) WICET in total is projected to cost $2.5bn to build for 90Mtpa, with Phase I of 27Mtpa due for commissioning in March 2015.
25 Section 5
Abbot Point Coal Terminal (continued)
Figure 20 details the main Queensland coal port expansion plans “Over the opening years of the terminal, still in active consideration. Should a number of these come to between 2015 and 2017, we’d expect fruition, AAPCT could face some contract repricing risk to its major cornerstone customer, Glencore Xstrata, whose 13Mtpa capacity utilisation between 40-60% … contract expires in mid-2019. That’s a result primarily of projects that are In October 2013, energy and mining research group Wood due to be feeding Wiggins Island not being Mackenzie warned with respect to the new Wiggins Island coal developed on the original timetable that export facility at Gladstone: was planned.”
Figure 20: Queensland Coal Port Expansions Being Considered
Port Owner Status Capacity addition (Mtpa) Likely completion Hay Point BMA Under construction (1) 11 2014 Gladstone WICET – Stage 1(2) Under construction 27 2015 Abbot Point Adani T0 – Stage I EIS review 35 2017 Abbot Point GVK T3 – Stage I EIS review 30 2017 Abbot Point NorthHub T4(3) In planning n.a. n.a. Gladstone WICET – Stage 2(4) In planning 32 2019 Source: Queensland Department of Transport and Main Roads (1) The BMA port expansion is being supported by Aurizon’s $185m Goonyella Rail Expansion. (2) The WICET is being supported by Aurizon’s A$900m Wiggins Island Rail Project to expand rail connections in the Southern Bowen Basin, due on line March 2015. (3) In April 2013 Aurizon (75%) and Lend Lease (25%) announced they had been shortlisted alongside AngloCoal by the Queensland Government to consider building AP-X, a multi-user coal export facility. (4) WICET - Stage 2 was planned to coincide with Glencore’s Wondoan Coal development and the associated 210km greenfield Surat Basin Rail - now on hold as of September 2013. (5) In May 2013 Glencore Xstrata announced they had scrapped plans to build a A$1bn 35Mtpa coal export facility at Balaclava Island, 40km North of Gladstone.
26 Section 5
Abbot Point Coal Terminal (continued)
5.2 Transfer of AAPCT from Adani Ports Bank of India in August 2013 proposed to dramatically reduce the allowable limits to foreign assets held by Indian residents, to Adani family the timing of this restructuring within the Adani Group was In March 2013 the Adani Group announced it was transferring fortuitous.xxxvi ownership of AAPCT from its listed Adani Ports entity to a new non-Indian domiciled private company 100% owned by the 5.3 Price paid of US$2.2bn for revenues Adani family for a consideration of A$235.7m.xxxv of US$195m pa? Technically Adani Ports remains 99% owner of the ordinary equity The Adani family agreed to buy the Adani Ports’ equity stake in AAPT trust (via the Mundra Port Holding Trust), which has in AAPCT for A$236m on 31 March 2013, resulting in a gain created a sublease of the port held by AAPT Pty Ltd. However, with on sale for Adani Ports of Rs4.2bn (US$77m). In addition, the Adani family now owning 100% of the redeemable preference the Adani family takes onboard the existing loan facilities shares outstanding against AAPT Trust, we understand this outstanding within the AAPCT legal entities, possibly as much transfers the full economic value of AAPCT to the family. as US$1.95bn. These include a US$800m loan from the State xxxvii This looks to us like a complicated and opaque cross-border Bank of India and a drawn down A$1.14bn of a second AUD corporate restructuring designed by lawyers and accountants syndicated loan facility – refer Appendix D. for financing, tax and political agendas rather than In May 2011, Adani stated AAPCT was expected to deliver operational logic. revenues of A$110m and with an operating profit (earnings The other change inserted during this March 2013 transaction before interest, tax, depreciation and amortisation, or xxxvii is that the Adani family now holds its equity stake in AAPCT EBITDA) margin of 54%, EBITDA of A$59m. Adani Ports’ via a Singaporean domiciled private company 100% owned annual report states revenue for AAPCT in the 10 months of by the Adani family, rather than having AAPCT owned by the consolidation during 2011/12 was US$112m, which translates Indian domiciled and listed Adani Ports. Given the Reserve to US$146m annualised. AAPCT revenues in 2012/13 increased to US$195m – Figure 21.
Figure 21: AAPCT – Profit & Loss: 2011/12 and 2012/13
2012 2012 2013 2012 2013 Year ended 31 March 10 months annualised 12 months annualised 12 months Rs million Rs million Rs million Rs million US$m US$m Revenue 5,817 6,980 10,611 146 195 Operating expenses -2,577 -3,092 -3,746 -64 -69 EBITDA 3,240 3,888 6,865 81 126 Depn & Amort. -1,471 -1,765 -3,344 -37 -61 EBIT 1,769 2,123 3,521 44 65 Finance costs -1,954 -2,344 -7,212 -49 -132 Pretax Loss -185 -222 -3,691 -5 -68
Tonnage 13,283,183 15,679,045 Revenue per tonne (US$/t) $10.96 $12.43 Revenue per tonne (A$/t) $10.60 $11.94 Revenue per tonne (US$/t) - ex TOP $8.28
EBITDA Margin 55.7% 64.7% EBIT Margin 30.4% 33.2%
EBITDA / Net finance costs (x) 1.66 0.95
USD / Rs exchange rate - average for period 47.946 54.451 Source: Adani Ports Prospectus, 5 June 2013 page 266
27 Section 5
Abbot Point Coal Terminal (continued)
During 2011/12 the annualised tonnage of coal exported from Figure 22: AAPCT – Enterprise Value Ratios (x) AAPCT was 13.3Mt, giving a US$11/t (A$10.60/t) charge. Year to March 2011/12 2012/13 AAPCT volumes were 13% higher in the 2012/13 year at EV / Sales 15.3 x 11.5 x 15.7Mt, giving a charge of US$12.43/t (which translates to A$11.94/t) – materially higher than the underlying Australian EVM 27.5 x 17.7 x rates of around A$6/t due to the receipt of US$65m of take-or- EV / EBIT 50.4 x 34.5 x pay penalties in 2012/13. This translates into a 2012/13 revenue-to-enterprise-value EV A$m US$m multiple of 11.5x; whilst well down from 15.3x 2011/12, this is Equity 236 246 still a very generous price. Debt - US$ 768 800 Debt - A$ 1,140 1,187 AAPCT has made progress in increasing its 2011 EBITDA margin of 54% to a 2012/13 margin of 64.7% (with a target of Enterprise Value 2,144 2,233 ($m) matching Adani Ports’ Indian operating rates of around a 75% EBITDA margin), this still implies an enterprise-value-to-EBITDA multiple (EVM) of 17.7x 2012/13 – Figure 22. The inverse of the Forex - USD to AUD 1.041 EVM is 5.6% - representing the gross cashflow yield in 2012/13. This represents insufficient gross cashflow to cover the interest carrying costs, and AAPCT reported a net loss before tax of US$68m in 2012/13, reflecting the excessive gearing carried by the newly acquired Australian business and low capacity utilisation rate. We would expect volume throughput to improve materially into 2014, but this is likely to be largely offset by a commensurate fall in the charge per tonne back to Australian coal industry norms of A$6/t.
28 Section 5
Abbot Point Coal Terminal (continued)
5.4 AAPCT – expanding from 6Mtpa to 5.5 Abbot Point Port – approval delays 240Mtpa? and changes AAPCT was initially commissioned in 1984 with a capacity of In April 2013 Aurizon and Lend Lease’s joint NorthHub 6Mtpa. It was expanded to 11Mtpa by 2007, and then rated consortium was shortlisted, along with Anglo Coal, by the capacity was more than doubled again to 25Mtpa in 2009. Queensland Government as the two proponents to examine a new multi-user, staged coal terminal and associated rail AAPCT was expanded from 25Mtpa to 50Mtpa in 2010 infrastructure at AP-X. Aurizon noted that this development: with estimated expenditure of A$913m. Commissioning was completed in January 2012. This was deemed “a relatively expensive initial investment, and represents the step function “is separate to the recently announced xI inherent in development of new corridors.” proposal by Aurizon and GVK Hancock AAPCT T0 is a further proposed expansion involving another to develop multi-user rail and port more doubling of Abbot Point Port’s current capacity by the infrastructure at Abbot Point using Adani Group. This would see the addition of 70Mtpa of new coal export loading capacity over two stages, each of 35Mtpa. GVK Hancock’s existing T3 terminal This would see two new berths each with a single 10,000t/hour (proposal).”xIv ship loader operating at a target 80% of the time (i.e. 80% of 24 hours per day, 365 days a year). On 8 July 2013 the decision on dredging at Abbot Point, The Adani Group has stated its target is to commence essential for both Adani and GVK’s coal export terminal projects construction work in 4Q2013 such that the target was delayed for a month.xIvi On 8 August it was deferred for commencement of T0 operations was 2016.xIi However, the a further three months and was due in November 2013.xIvii EPBC Act approval is still outstanding and as of October Then, in October 2013, the decision was further delayed and is 2013, first coal shipments are now not expected until 2017. currently due in December 2013.xIvii This delay means the AAPCT xIii Consultancy firm BMT WBM was appointed in April 2013 to T0 will not be ready for exports until 2017.xIix The decision on undertake the detailed engineering design. xIiii the plan to dredge three million tonnes of spoil and dump it at sea is controversial, given it will occur within the Great Barrier Given the downturn in the coal market over the last year, a Reef World Heritage Area and is likely to cause environmental number of Queensland coal export port expansions have been damage. The actual site for this spoilage to be dumped has not delayed or cancelled. The BHP Billiton-Mitsubishi Alliance (BMA) been agreed. Debate is now considering extending the pier at proposal for a 60Mtpa coal export terminal (T2) at Abbot Point an additional capital cost of A$360m or requiring the spoil to be has been withdrawn due to adverse market conditions.xIiv The dumped onshore, again at significant extra capital cost. expansion plans for Abbot Point Port are detailed in Figure 23:
Figure 23: Abbot Point Coal Terminal – Expansion Plans
Project Name Status Next step Proponent Description T0 Proposed Waiting on EIS approval AAPT 35m tpa coal export terminal + associated rail (1) T1 Existing Utilisation ramping up from AAPT 50m tpa coal export terminal + associated rail 40% T2 On hold BMA 60m tpa coal export terminal + associated rail T3 Proposed Waiting on Financial close GVK Hancock 60m tpa coal export terminal + associated rail AP-X Proposed In planning NorthHub AP-X - a multi-user coal export facility. T0 / T2 / T3 Dredging Waiting on EIS approval NQBP (1) Combined dredging proposals
(1) NQBP - North Queensland Bulk Ports Corporation.
29 Section 5
Abbot Point Coal Terminal (continued)
Following the September 2013 Federal election, a decision by the new Federal Environment Minister, Greg Hunt, is pending on both the dredging and Adani’s T0 project. The Great Barrier Reef Marine Park Authority plays a critical role in protecting the Reef, setting development policy for the region and helping to assess port developments. However, an October 2013 ABC 7.30 Report raised a number of questions with respect to conflicts of interest relating to two members of the Board of the Marine Park Authority. The potential conflicts relate to relationships with two companies, Guildford Coal and a second, Gasfields Water and Waste Services, a company jointly founded in June 2013 with Mr Eddie Obeid, Jr.I As a result of this, Greg Hunt has ordered an independent probity inquiry into the allegations raised.Ii
5.6: Dudgeon Point Port expansion on hold Dalrymple Bay terminal’s operator, Canada’s Brookfield Infrastructure Group, and Adani Mining were allocated land by the Queensland Government in late 2011 to build one coal terminal each at Dudgeon Point at the Port of Hay Point. However, construction of the two new coal export terminals at Dudgeon Point in Queensland has been delayed until at least 2015 because of lower global coal demand, the state- owned North Queensland Bulk Ports Corp said in June 2013. Iiii Construction was originally due to start in mid-2013 on the estimated A$12bn total cost for these projects. The terminals would be adjacent to the Dalrymple Bay coal terminal and 25 km south of Mackay on Queensland’s central coast. They were designed to have a combined capacity of 180Mtpa.
30 Section 6
Rail Options for Adani Mining in the Galilee Basin
Adani Mining has outlined three options for connecting the “In my world right now, brown is the new Carmichael coal deposit to the coal export terminal at Abbot black. Brownfields railways, brownfields Point Port: ports, brownfield mines… new and capital- 1. Option 1 – from mine site, 118km east to the proposed intensive greenfield projects seem all but a standard gauge Alpha Railway and then 325km north-east Ivi to Abbot Point Port (utilising part of the 495km greenfield rail memory.” proposal by GVK Power’s Alpha Coal mine and rail project); 2. Option 2 – from the mine site, 190km along a dual standard/ However, Adani Mining has publicly stated that it is reluctant to narrow gauge line to the existing narrow gauge Goonyella progress Option 2 as its preferred route. The existing narrow system (the “East-West” proposal), connecting 8km south of gauge system means smaller scale - lower volumes per train Moranbah; and/or and lower train speeds due to older, less purpose built track. Additionally, Adani Mining states: 3. Option 3 – from the mine site, 70km to the east of Carmichael deposit, then north to the Abbot Point Port via a 300km standard gauge greenfield railway (“the North Galilee Basin Rail project”). “Through ongoing engagement with Option 1 is dependent upon GVK Power of India developing its Aurizon, it was determined that rail access own US$10bn Alpha Coal mine and rail proposal, a proposal to the port of Abbot Point via Moranbah we believe is unlikely to proceed in its current form. We note is not only a longer route, but also that having the combined coal volume of Adani Enterprises’ increases the burden on the network as Carmichael mine (60Mtpa) and GVK’s Alpha Coal mine (30Mtpa) would give significant critical mass to this rail option, should the the existing system will require significant two companies be able to work together effectively. However, upgrade to support the additional capacity to date there has been little to suggest such co-operation is requirements.” Ivii progressing. Adani Mining recently stated:
Option 3 involves the recently announced North Galilee Basin “The Alpha Railway, besides being a Rail project. Adani Mining proposes to build a greenfield railway much longer route to Abbot Point from the 70-100km east from the Carmichael mine to Mistake Creek, then approximately 300km north-east to Abbot Point Port. Adani north Galilee Basin, traverses through the Mining’s Initial Advice Statement lodged in May 2013 for the large flood plains of the Sutter and Bogie second section of 300km states a capital cost of A$2.2bn,Ivii Rivers, which pose serious challenges for suggesting the entire 400km line would cost upwards of A$3bn. construction and maintainability of a heavy Without a shared rail link from the Galilee Basin to an established haul rail option. Further, uncertainty with coal export port, in our view there will be no successful regard to timeframes and commitments development of the huge thermal coal deposits present. It is telling that in November 2011, Jason Economidis, Director of around construction of the Alpha Project are Growth Projects for VALE Australia, stated: a constraint to adoption of this proposal.” Iv “If all providers build their own rail, that Option 2 in our view is the most likely scenario, given it involves the least greenfields rail development. Adani Mining estimated would cost north of A$4bn each. Based on this option would have a capital cost of A$1.2bn. Whilst it does the low margins associated with thermal require the construction of a greenfield railway line of 190km, by coal, individual rail corridors are very linking-in to Aurizon’s existing railway network, it best leverages unlikely to be viable.” existing infrastructure (providing better rail and port system optionality), albeit of the lower volume narrow gauge type. Aurizon CEO Lance Hockridge best summarised this:
31 Section 6 Figure 18: AAPCT – Rail Options for Adani Mining in the Galilee BasinThroughput (continued) of Coal Exports (June year end) 20
16
12 Fast forward two years, and there has been no visible progress but with this cost rising steeply to A$30/t at 25Mtpa utilisation towards a shared rail network from the Galilee Basin. We think it and above A$40/t below 20Mtpa – Figure 24.Ixii 8 is telling that VALE SA of Brazil has taken a US$1bn write-down Million tpa This is a key cost constraint on any analysis of the Galilee Basin on its Australian coal assets and in July 2013 put its Degulla – even assuming a greenfield project of 60Mtpa, a scale never coal deposit in the Galilee Basin up for sale, suggesting they do 4 done before in Australian black thermal coal mining history, the not see much probability for profitable development.Iix rail cost is prohibitively high, particularly when coupled with a 0 high strip ratio, high ash content and well below benchmark
energy content.2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 6.1 Narrow versus standard gauge Source: North Queensland Bulk Ports Corporation There are arguments for and against narrow versus standard Figure 24: Galilee Basin to APCT – Incremental Economic gauge railways. As Aurizon’s 2009 Coal Rail strategy plan states Cost Figureof Rail 24: Galilee Basin to APCT – - on the positive: Incremental Economic Cost of Rail 40 “It would be possible to build new standard 35
gauge rail corridors in central Queensland 30
which would have higher efficiency than 25
existing corridors. QR Network has existing 20 standard gauge and dual gauge track in 15
south east Queensland … to the NSW Economic Cost ($tonne) 10 border. The existing port precincts are 5 currently serviced by existing narrow gauge 5 10 15 20 25 30 35 40 45 50 55 60 Incremental Tonnes (millions) rail corridors of substantial length.” Source: 2009 Coal Rail Infrastructure Master Plan, QR Network
On the negative: This is above our conservative estimate of A$15-16/t which we “Therefore it is unlikely that economic and have based on Aurizon’s average 2012/13 revenue of A$0.043/ network capacity analysis will support km/t over 400 km, less a 10% discount for the scale of volume and distance – Figure 25. A discount per km/t is likely given building additional standard gauge rail the scope for Adani Mining and/or Aurizon to leverage this corridors to these port precincts in the greenfield project to other proposed coal developers in short term. This is because there are the Galilee. substantial benefits in expanding the However, against this, we note that Aurizon has proposed to existing network instead. Incremental the Queensland Competition Authority a new 36% average tariff tonnage increases only require incremental increase in its 2013 Access Undertaking (“UT4”) relative to its 2010 Access Undertaking (“UT3”). A tariff increase of this size expansions rather than the construction would cost the Queensland coal industry A$300m annually in of a whole new network. In addition, there extra freight charges. Depending upon which rail option Adani is the benefit of interoperability of trains Mining chooses, Carmichael could be exposed to charges from across the existing network ... to avoid Aurizon, a monopolistic rail provider. stranded assets.”Ixi
6.2 Rail cost to Abbot Point Port … A$15-16/t Aurizon’s “2009 Coal Rail Infrastructure Master Plan” refers to the economic cost of transporting Galilee coal to Abbot Point Port, and references a cost of A$18-19/t at 60Mtpa capacity, 32 Section 6
Rail Options for Adani Mining in the Galilee Basin (continued)
6.3 A deal with Aurizon? Figure 25: Rail Costs per Tonne (A$/t) In June 2013 Aurizon gave an update on its strategic plan for Aurizon – Coal FY2011 FY2012 FY2013 “Co-ordinated Rail and Port Development”, which continues Tonnage (million) 181.6 185.6 193.7 to be predicated on Wood Mackenzie’s bullish forecast that ntk (billion) 40.9 41.9 43.6 “Demand for seaborne thermal and metallurgical coal is Revenue ($m) 1,691 1,772 1,863 projected to more than double by 2030 (from 2012 levels).” As the key assumption underpinning this doubling of global Km / tonne 225 226 225 seaborne coal trade, China was expected to deliver a 305% Revenue (per ntk) $0.041 $0.042 $0.043 increase from 2012 levels by 2030 to become by far the largest importer of coal at almost half of all global traded coal imports. Carmichael to Abbott Point 400 We would note this bullish projection is used to underpin many Rail cost per tonne (A$) $17.09 companies seeking to justify coal developments, including GVK. However, it stands in direct contradiction to the very detailed Rail cost – assuming a $15.38 10% discount (A$/t) Bernstein Research’s June 2013 report “The Beginning of the End of Coal” that forecasts China’s coal consumption will peak by 2015 and that China will return to being a net exporter of ntk – revenue per net tonne km coal on an opportunistic basis whenever the coal price shows Source: Aurizon annual report 2013 any strength.Ixvi
33 Section 7 Carmichael Coal Project: Economic and Financial Risks
7.1: Carmichael Coal – low energy, high Ord Minnett resources analyst Peter Arden described the ash, deep, significant overburden Carmichael deposit as uneconomic due to its low quality: The key coal mine parameters for the Carmichael deposit are detailed in Figure 26: “Indian companies are accessing what we would’ve previously considered as Figure 26: The Carmichael Coal Mine Parameters uneconomical, marginal, at best, thermal
Mine Licence EPC1690, EPC1080 coal. The world is hungry for thermal coal, Mine Type Open cut & Underground a lot of our Newcastle and Queensland Mine Area 44,700 hectares traditional thermal coal is much higher Indicated and measured resource 4,400 million tonnes quality going into Japan and South Korea. Inferred Resource Estimate 5,740 million tonnes They don’t normally sell down around Strip ratio (tonne:tonne) 15.8 : 1 that quality but Indians are very happy to Strip ratio (bcm: tonne) 5.8 : 1 take it.”Ixvii Overburden removal 220 million BCM pa Run of Mine (ROM) Coal 50 million tonnes pa Carmichael Deposit … low energy content Average yield 79% Saleable production 40 million tonnes pa One of several key constraints of the Carmichael deposit is that Total Moisture (post washing) 18% it has a stated energy content of 5,400-5,500kcal (GAR), well Average Ash content (raw) 26% below the traditional Newcastle benchmark 6,300kcal (GAR). The relative energy content benchmark and pricing implications Average Ash content (post washing) 25% are detailed in Figure 27: Energy Content (kcal NAR) 5,260 Life of mine 60 years Distance from existing rail 190 kilometres Distance from port 400 kilometres Distance from dam water 220 kilometres
(1) Adani suggests that the resource is 10 bn tonnes as at Aug 2013, no details. 40MTPA Opencut, 20Mtpa U/G All run of mine (ROM) coal will be transported by truck and / or overland conveyor to a centralised coal handling facility, where any high ash (>25% ash) portion will be washed for blending with the bypass coal (unwashed coal).
34 Section 7
Carmichael Coal Project: Economic and Financial Risks (continued)
Figure 27: The Carmichael Coal – Energy Content Carmichael Deposit … a strip ratio of 15.8:1 & Pricing A strip ratio is a measure of how much overburden rock needs Current % of GAR Price to be removed before an open-cut mine can access the coal. GAR NAR price benchmark differential We estimate a strip ratio of 15.8t/t of coal; Adani Mining refers US$/t to a 6:1 bank cubic metres (BCM)/t ratio – two ways of stating Newcastle the same ratio. benchmark 6,300 6,080 US$79.40 6,080Kcal Over the 60 year mine life, the Carmichael mine has a target Newcastle of 50Mtpa ROM output, with a recovery yield of 79% to give benchmark 5,699 90% 5,500 US$62.50 79% saleable coal of 40Mtpa. During the twenty years of peak 5,500Kcal production over 2020-2039, the Carmichael mine is targeted to GVK Alpha 5,800 92% produce 72Mtpa of ROM thermal coal, with a yield of 81% to give deposit saleable coal of 58.5Mtpa (for ease of comparison, we accept Adani Carmichael 5,450 87% 5,260 US$59.77 75% Adani Mining has rounded this approximation to a 60Mtpa target deposit at peak production).The Carmichael deposit has eight seams of a combined thickness of 25-35 metres.Ixx The open cut mining will have a depth of up to 280 metres.Ixxi Figure 28 details the continued decline over 2013 for the FOB Newcastle 5,500kcal NAR pricing, with the price down from There is no strict convention when it comes to quoting a strip US$75/t at the start of 2013 to US$67/t in July 2013, with a ratio. It can be quoted in terms of tonnes of rock overburden to further US$4-5/t fall to US$62.50/t in October 2013 reported every tonne of coal produced or alternatively in terms of volume by Platts. of rock overburden moved for every tonne of coal produced. When we estimate the cash cost of production for the Coal is half as dense as overburden rock. Given rock found Carmichael mine (see Section 7.4) we adjust the cash cost to in association with coal deposits has a general density of reflect the energy equivalent of that assumed in the Newcastle ~2,700kg/cubic metre, this is roughly double the ~1,300kg/ FOB 6,080kcal benchmark. cubic metre of coal. So a tonne to tonne strip ratio will be more than double the strip ratio when expressed in terms of volume (expressed as bank cubic metres or “BCM”).
Figure 28: The Carmichael Coal – 5500kcal NAR Newcastle Benchmark Price (US$/t, Jan-July 2013)
Source: Platts
35 Section 7
Carmichael Coal Project: Economic and Financial Risks (continued)
Adani Mining estimates the overburden removal volume is 220 Yield is defined as the ratio of run-of-mine coal to saleable coal, million BCM pa over the 60 year life of the mine. The Carmichael with the Australian coal sector generally in the range of 70-80%. proposal is for a series of six open cut mines to give a total of To illustrate, Rio Tinto’s Australian coal mines average yield sits 40Mtpa ROM coal, plus 3-5 underground mines of a combined at 76%, ranging from Warkworth at 65% on the low end to the 10Mtpa, to generate the 50Mtpa ROM total, with a yield of 79% Clermont mine as the standout at 96% due to its extremely to give 40Mtpa of product coal. Overburden only relates to open large coal seams (approaching 30 metres). GVK’s Alpha mine cut mining, the strip ratio is based on overburden of 220M BCM works on an assumed yield of 76% and China First assumes a to 40Mtpa ROM open cut output or 5.8BCM:1t. We will reference 72% yield as two other comparisons. this 5.8:1 in estimating the cash cost of production for open- Carmichael Deposit … open cut mining to 280 metres depth cut coal in section 7.4. So to make this comparison in terms of tonnage, we need to increase the BCM of rock per tonne of coal While the discussion on strip ratios quantifies the level of rock by 2.7x, giving a 15.8:1 strip ratio on a tonne of overburden overburden that needs to be removed to access the eight coal removed per tonne of coal produced. seams, the plan for an open-cut mine at the Carmichael deposit requires a depth of up to 280 metres, almost double that Carmichael Deposit … high ash content required for the southern Galilee Basin deposits, reducing the One of the key issues Adani Enterprises faces is the very high economics of accessing the lower seams.Ixxxiv ash content of the Carmichael thermal coal. With an ash content of 25-30% before washing and blending, this coal would Figure 29: Typical coal quality parameters for the Carmichael Project not comply with proposed new Indian rules with respect to imported coal for UMPPs in India.Ixxvii The stipulated maximum ROM Mt Mt ROM Year Mt Product Yield ash content set by India’s Ministry of Environment and Forests U/G Mt Total O/C Coal (MoEF) is 12%. “The validity of environmental clearance granted is subject to compliance with the coal quality parameters 2016 5.5 5.5 4.1 indicated,” the Ministry said in its memorandum.Ixxviii 2017 19.0 19.0 14.1 2018 25.5 2.8 28.3 21.6 Getting the ash content for Carmichael coal down from 25- 30% to 12% is likely to pose significant challenges for Adani 2019 32.5 18.8 51.3 42.9 84% Enterprises with respect to their strategy of vertically integrating 2020-2024 239.5 99.7 339.2 276.9 82% from the Carmichael project through to the supply of thermal 2025-2029 270.0 100.8 370.8 300.6 81% coal into Indian UMPPs. The Environmental Impact Statement 2030-2034 270.0 97.7 367.7 297.5 81% (EIS) shows the coal produced will vary from 20-40% ash, with 2035-2039 270.0 94.6 364.6 294.4 81% an average of 25% over the mine life forecast. With the 75% level 2040-2044 270.0 81.2 351.2 281.0 80% of coal preparation and washing forecast by Adani Mining, this 2045-2049 270.0 69.9 339.9 269.7 79% gives a 79% yield over the life of the mine. 2050-2054 241.4 34.2 275.6 212.8 77% AME estimates that every 1% higher ash content over the 2055-2059 162.0 21.9 183.9 137.9 75% 5,500kcal benchmark assumption of 20% would result in a price 2060-2064 166.5 166.5 123.2 74% penalty of US$0.50/t.Ixxii The implication is that working with the September 2012 EIS assumption of an ash content averaging 2065-2069 134.1 134.1 92.6 69% 25% would result in a US$2.50/t penalty to Adani. 2070-2074 29.2 29.2 21.6 74% Total 2,405.2 621.6 3,026.8 2,390.9 79% Carmichael Deposit … coal mine yield of 79%? Average 40.1 10.4 50.4 39.8 79% A major revision from the Initial Advice Statement of 22 October over life 2010 to the Environmental Impact Statement of September Average 2012 saw the forecast yield of the Carmichael project lifted over 52.5 19.6 72.1 58.5 81% from 86% to 99% in the first 25 years of full production. The 2020-2039 reason for this substantial upgrade was not presented. The Supplementary Environmental Impact Statement of November 2013 referenced “editorial errors” in the earlier EIS for the mine plan and this saw the average yield assumption revert back to a more realistic 79% yield, consistent with the Australian sector average.
36 Section 7
Carmichael Coal Project: Economic and Financial Risks (continued)
7.2: Carmichael Coal Mine and Rail Figure 30: Increase in Labour Costs Since 2001 – Australia vs Other Coal Nations Project approval status Adani has been developing the Carmichael project since its acquisition in August 2010. However, Adani is yet to finalise its preferred rail route and reach financial close. As at 22 November 2013 Adani Mining released its Supplementary Environmental Impact Statement. The final government approvals are also still outstanding for dredging for the T0 project at Abbot Point – see Section 9.1. 7.3: Australian thermal coal – industry cost structure The average cost of production for Australian thermal coal increased dramatically between 2006 and 2012 – a recent Westpac presentation at Coaltrans in August 2013 “Strength of the AUS$: Impact on competitiveness of Australian coal” put this estimate at US$76/t in 2012, a 110% increase from the US$36/t in 2006, resulting in a massive deterioration in Source: ABS, Port Jackson, Wall Street Journal Australian thermal coal’s international competitiveness. The single most significant impact on this is the rise of the AUD. The cost of production of thermal coal rose 53% from A$48/t in Figure 31: Australian Thermal Coal Margin Curve (2013) 2006 to A$73/t by 2012. Westpac identified the second major driver of the declining international competitiveness of Australian coal as due to the steep rise in Australian mining labour costs – rising over the 2001 to 2012 period at a CAGR of +16.6% – Figure 30. Low unemployment, a skills shortage and harsh conditions in remote locations were all factors driving this increase. Labour currently represents some 50% of new project costs in coal. The AME estimates the average Australian coal mining labour rate in 2012 at US$122,000 p.a., double that of the US, the largest OECD coal producer. While the AUD/USD exchange rate and Australian mining labour costs have moderated into 2013, the latest available Australian thermal coal cost curve suggests that at the current spot price of US$79.40/t (Newcastle FOB 6,080kcal), the average thermal coal mine in Australia is operating at a cash breakeven basis – Figure 31.
Source: Wood MacKenzie – 8 August 2013
37 Section 7
Carmichael Coal Project: Economic and Financial Risks (continued)
7.4: Carmichael Coal – estimated cash We have used Goldman Sach’s methodology to estimate the cash cost of production for the Carmichael open-cut mine, working cost of production of US$84/t on the key parameter of a 5.8BCM:1t strip ratio. We incorporate The benchmark thermal coal export price from Newcastle in a 10% lower cost of overburden removal for Carmichael project, October 2013 was US$79.40/t FOB (6,080kcal NAR). Given assuming economies of scale and productivity savings are the lower than benchmark energy content of the Carmichael achievable. We have used the new assumption by Adani Mining coal (5,260kcal NAR), we examine the mine cash cost of of a 79% yield on the ROM production rate of 40Mtpa of open production on an energy-adjusted basis so it is comparable to cut mining, as referenced in the November 2013 Supplementary the Australian benchmark price for thermal export coal. Environmental Impact Statement (SEIS). We factor in the A$2/t royalty owing to Linc Energy (refer Section 1) plus a Queensland Figure 33 details an estimate by Goldman Sachs’ Global Government coal royalty of 7% (acknowledging this may be Mining Research Team of the cash cost of production of two waived in initial years). For the rail costs of transporting Carmichael hypothetical Australian thermal coal mines, one with a strip coal 400km to the AAPCT, we assume A$0.039/t/km (a 10% ratio of 6.0 BCM/t of coal, the other at 7:1 BCM/t. The cost discount to prevailing rates, given the economies of scale should structures are calculated on the assumption that the coal will such a project get up and running). This gives a base cash cost be transported by rail 150km (at the current prevailing rate of of production of A$71.93/t. We then adjust for energy content of A$0.043/t/km – refer Section 6.2) to the port (with port charges 5,260kcal (NAR) to get a cash cost of A$87.13/t or US$83.56/t on of a standard A$6/t), pay standard Queensland coal royalties of an energy adjusted basis (see Fig 33). 7% (Figure 32) and have a ROM-to-net-saleable-coal yield ratio of 70-80%. This generates an energy-adjusted cash cost of This cash cost does not include mine remediation costs or A$78-84/t FOB, which at the current AUD/USD exchange rate interest expenses. of $0.959/A$1 gives a cash cost of production of US$75-81/t. Adani Mining claimed a cash cost of A$33/t This leaves little, if any, room for profit with a current market price of US$79.40/t (Newcastle FOB (NAR)). We note that Adani Mining provides an estimated cash cost of production of A$33/t in its now superseded EIS conclusion.xci We note that the Queensland Government’s newly released ‘Galilee We acknowledge this is well below our estimate of A$75.38/t Basin Development Strategy’ proposes an as-yet undefined royalty (before adjusting for energy content). The EIS provides no concession in early years for the first mover in the Galilee.Ixxxix details as to how this is derived, nor gives any context of the estimate. Figure 32: Queensland Government State Coal Royalties We assume it is a free on rail (FOR) estimate that excludes: Coal price range % royalty A$0-100/t 7.0% • the royalties payable to the Queensland Government (7% or A$5.56/t) A$100-150/t 12.5% >A$150/t 15.0% • Linc Energy ($2/t); • railway and port charges estimated at a combined A$21.48/t. This also could exclude sustaining capital expenditures, as this is referenced in the same section as part of the A$16.5bn total investment over the life of the mine. As such, the A$33/t is not far off our A$40.11/t mine estimate pre-overheads, particularly given the A$33/t Adani Mining forecast was calculated using a 99% yield, a 50% higher production rate and a significantly lower coal handling and preparation plant (CHPP) processing rate.
38 Section 7
Carmichael Coal Project: Economic and Financial Risks (continued)
7.5: Carmichael Coal Mine – project risks The magnitude of this greenfield project is in itself a key project risk – a series of coal mines of this scale have never been built The Carmichael project involves a proposal to build a 40Mtpa in Australia – not even by experienced operators, let alone by ROM greenfield open cut coal mine and a series of underground a firm with no experience in Australian mining. Other key risks coal mines of total combined capacity of 10Mtpa in the same include the: deposit. This would give a proposed capacity of 50Mtpa ROM with a yield of 79% to generate 40Mtpa of saleable thermal 1. probability of further timetable and cost blow-outs; coal for export from Queensland. In general, the coal is low 2. ability of the Adani Group to raise sufficient debt and equity rank – non-coking, high volatility and high ash content, modestly finance to achieve financial close; high in inherent moisture and low in sulphur content with an energy content of 5,400-5,500kcal (GAR), some 15% below the 3. very marginal economics of the project at current thermal coal Newcastle benchmark. prices; and In general, the coal is low rank – non-coking, high volatility and 4. remote location of the coal deposit. high ash content, modestly high in inherent moisture and low We discuss each of these below. in sulphur content with an energy content of 5,400-5,500kcal (GAR), some 15% below the Newcastle benchmark.
Figure 33: Australian Thermal vs Carmichael Coal Cost of Production for Open Cut Mining
Transport Type Rail Australia Carmichael open-cut Overburden A$/prime BCM 4.30 4.30 3.87 Strip Ratio Prime BCM/t ROM 6.0 7.0 5.8 Overburden A$/t ROM 25.80 30.10 22.64 Mining A$/t ROM 4.75 4.75 4.75 Subtotal A$/t ROM 30.55 34.85 27.39 CHPP A$/t ROM 4.30 4.30 4.30 Yield t product/t ROM 80% 70% 79% Subtotal A$/t 43.56 55.93 40.11 Sustaining capex A$/t 2.85 2.85 2.85 Overheads A$/t 3.75 3.75 3.38 FOR A$/t 50.16 62.53 46.34 Queensland Govt. Royalty A$/t (7% if below A$100/t) 5.56 5.56 5.56 Linc Energy Royalty A$/t 2.00 Distance to Port km 150 150 400 Transportation rate A$/t 0.043 0.043 0.039 Transportation A$/t 6.45 6.45 15.48 Port costs A$/t 6.00 6.00 6.00 FOB A$/t 68.17 80.54 75.38 CV - NAR basis kcal/kg 5,600 5,800 5,260 Non-CV discount % 5% 0% 0% FOB @ 6,080kcal A$/t 77.91 84.42 87.13 FOB @ 6,080kcal US$/t $0.96 74.71 80.96 83.56 Source: Goldman Sachs Global Investment Research “Australia: Metals & Mining”, July 2013, with the Carmichael data the authors’ extrapolation
39 Section 7
Carmichael Coal Project: Economic and Financial Risks (continued)
The risks – Adani Enterprises’ limited coal mining Adani Enterprises’ 2008/09 annual report states Indian coal experience mining is expected to “start from October 2010.”xcvii However, the May 2013 Adani Enterprises investor presentation states Adani Enterprises has very limited mining experience, having production at only one of the four Indian coal deposits had commissioned a single thermal coal mine in Indonesia that is commenced from January 2013 at an as-yet undisclosed rate of currently producing 4Mtpa. To go from having never operated production – with no commercial volume of sales disclosed.xcviii a mine in Australia to the successful and safe commissioning and ongoing operation for 90 years of the largest coal project in Adani Enterprises has entered into “Mine Developer & Operator” Australian history introduces a myriad of operational, labour and (MDO) arrangements with state owned entities in these four blocks, environmental risks. under which the ownership of the coal remains with the state owned entity, and Adani functions as the contractor. Environmental Adani Enterprises describes its coal mining expertise as follows: clearances for at least one of these deposits is being challenged before the National Green Tribunal – refer Section 9.2. “Adani is developing and operating mines The risks – capital cost and timetable blow out? in India, Indonesia and Australia. Extractive Adani Mining’s EIS submission estimates the Carmichael mine capacity is scheduled to increase from and offsite infrastructure cost at A$5.9bn, plus another A$1.2bn 3Mtpa of thermal coal in 2011 to 200Mtpa for the 190km railway line (Option 2).xcix However, the Australian by 2020, making Adani one of the largest mining sector has experienced rampant cost inflation. The mining groups in the world.”xcii Minerals Council of Australia, the peak mining industry lobby group, has strongly argued this capital cost blowout risk is putting “opportunity at risk” – Figure 34. Adani Enterprises describes its Indian coal mining business as:
Figure 34: Thermal Coal – Capital Spend to Build a Tonne “Mine developer and operator with of New Capacity (US$/t) 110Mtpa order book.” xciii
The reality is less substantial than these two company descriptions imply. Adani Enterprises had never operated a coal mine prior to 2008/09 anywhere, and as of the 2012/13 annual report only had a single thermal coal operating commercially in Bunyu, Indonesia, producing 2-4Mtpa over 2010 to 2013. Adani does not rank in the list of major coal producers in Indonesia, let alone in the world. In 2008/09 Adani Enterprises commenced its thermal coal mining operation at Bunyu in Indonesia with coal production of 1.0Mt. At the time, it was forecast that production would rapidly ramp up to 9.5Mtpa by 2013. However, production has been well short of this target, being 2.2Mt in 2011/12 and 4.0Mt in 2012/13. Source: “Minerals Council of Australia, 2012 ‘Opportunity at Risk’” Bunyu’s poor performance has continued, with production in the six months to September 2013 at 1.53Mt (3Mt annualised), again The Adani Group’s various Australian projects have all witnessed below guidance of 5-7Mtpa and well below Adani Enterprises significant timetable slippage or cancellation over the last four medium-term target to increase production to 11Mtpa. years. These projects all face the probability of further capital In India, Adani Enterprises 2011 investor presentationxcvi clearly cost and/or timetable blow-outs. states its Indian mining experience:
“Largest Coal Mine Developer & Operator … Coal Mining Operations – 130Mtpa”
40 Section 7
Carmichael Coal Project: Economic and Financial Risks (continued)
The risks – an uneconomic proposition? Figure 35: Incentive Price for Thermal Coal Projects (15% IRR) The rapid deterioration in the price of thermal export coal over 2012 and 2013 has left many existing and proposed thermal coal projects in Australia uneconomic. The Australian Coal Association, which represents coal exporting companies, argues that the incentive price for the majority of thermal coal projects is in excess of US$100/tcii relative to a current Newcastle FOB (NAR) price of US$79.40/t – Figure 35. At an estimated energy- adjusted cash cost of production of US$84/t, at current thermal coal prices Adani Mining will be loss-making at a cash level, even before considering a return on its A$6.4bn of capital investment. Peabody Energy, the world’s largest private sector coal producer, reported in October 2013 that its Australian division’s gross margin per tonne of coal sold dropped 68% yoy to US$8.25/tonne from US$26.08/tonne the year earlier, despite being a mix of thermal and higher value coking coal.ciii The economics of existing and proposed coal projects has materially declined in the last year.
We also note that BHP Billiton’s BMA discontinued development Source: Wood Mackenzie, 8 August 2013 of the 14Mtpa Saraji East coking coal proposal in November 2013.civ This is notwithstanding the sunk cost of A$2.45bn to acquire the project in 2008, its high coking coal value and its A similar port take-or-pay charge will be required by any banking location in the Bowen Basin, such that transport infrastructure is syndicate to AAPCT T0. already in place. The risks – remote location of the coal deposit The current price of domestic coal in India is around US$30/t. No industrial scale water access within 200km The introduction of a new and substantially sized supply of The Galilee Basin is a low rainfall region that is prone to drought. imported coal costing in the US$80-100/t range (landed, As such, in order to secure a reliable water supply for the mine, including Australia-India shipping costs of some US$15/t) will a significant investment in water infrastructure, including new place upward pressure on electricity utilities’ end customer pipelines will be required. It appears that water supply issues have pricing and the Indian economy’s ability to sustain coal-fired yet to be resolved for the project. generation. The Australian prices will be part of the permanent cost structure of coal in India. The risk to Adani Power’s India- The SEIS prepared by energy and engineering consultants GHD based generation resources and other power generators in India for Adani Mining of November 2013 suggests the Carmichael is clear without significantly higher Indian electricity prices. coal mine would require approximately 12,000 million litres of water per annum. The risks – take-or-pay contracts: a major contingent liability Originally, Adani stated the preferred source option for the project was the Connors River Dam project. Commissioning of the dam For the Carmichael mine to become operational, Adani and pipelines was expected by Adani Mining in early 2014cvii, Enterprises may have to enter long-term take-or-pay rail and but this A$1.2-2.0bn project has been put on hold indefinitely port contracts priced at well above industry norms due to the by the Queensland Government. Due to this cancellation, in the extreme distance to port. Adani Enterprises may have a long Carmichael mine EIS, Adani propose sourcing all water for the mine term liability to pay a significant proportion of its A$620m annual from local sources; extraction from local creeks and rivers plus 17 rail freight charge (40Mtpa at A$15-16/t) to the provider of rail boreholes. We consider localised water solutions unlikely to be services, irrespective of whether it has actually shipped any consistently available during any extended drought period. thermal coal. As such, if thermal coal prices stay at or below current levels, the Carmichael mine would operate at a cash In November 2013 the Queensland Government proposed operating loss – just so it can fund its take-or-pay agreements. supporting the development of localised water solutions, plus The Queensland Resources Council in October 2013 flagged providing water allocations and potential supply from the Burdekin this type of arrangement as a major industry cost, stating “no Resources Operations Plan at a price to be determined. For the relief has been offered on onerous take-or-pay obligations.”cv Carmichael mine to deliver 40Mtpa coal consistently over the next 41 Section 7
Carmichael Coal Project: Economic and Financial Risks (continued)
60 years, we assume this pipeline or an equivalent source of water The risks – extreme rainfall events external to the region (such as the Connors River Dam) will be Climate change is already resulting in more frequent and more required. Localised water solutions are unlikely to be consistently intense weather events than have occurred historically. Any available during any extended drought period. proposed mines in the Galilee Basin will be subject to impact Until a feasible and reliable supply of water is determined, we see from both drought and flood. risk to the project’s final capital costs. In recent years major thermal coal mine flooding has occurred at No industrial power grid within 200km Ensham, Queensland and Yallourn, Victoria (Figure 36) – costing the mine owners hundreds of millions of dollars in lost productivity On a project of 60Mtpa coal, the maximum power required is and restoration costs. Adani Mining states it is building forecast by Adani Mining to be approximately 200MW. There infrastructure to withstand 1 in 100 year extreme weather events. are no viable electricity transmission lines within 200km of We suggest with Australia very prone to dramatic climate change this project capable of providing the power to move billions of impacts, extreme weather events will become increasingly tonnes of overburden rock. common, and harder to deal with. Having never dealt with these In August 2013 Adani Mining’s Galilee Transmission Pty Ltd extreme events before, we question how Adani Mining can claim announced a proposal to build a 250km transmission line to link to be suitably prepared to take on these risks. into Powerlink’s Strathmore substation at a construction cost Since 2008cix Queensland’s coal production regions have of A$300m. The transmission line is expected to have an initial experienced record floods, in some cases, twice. This is a capacity of 35MW with commissioning due December 2015, key vulnerability for the Carmichael project even once it is subject to all necessary approvals. Adani Mining comments that operational. BHP Billiton BMA in 2013 announced it would an expansion of capacity may be undertaken. This will be an introduce new trestles at Hay Point Port to reduce storm open access link and the Director-General of the Department vulnerability, with the new trestles over 17 metres above the of Energy and Water has issued Galilee Transmission Pty Ltd a high tide sea level versus the existing trestles at 12 metres. This Transmission Authority for the Galilee.cviii 50% increase in the height of the pier would indicatively put Hay No sealed road access Point above the water height of Tropical Cyclone Yasi, whereas previously the benchmark was based on the lower experience The proposed road access to the mine is 90km of currently of Tropical Cyclone Ului. cx The benchmark for natural disaster unsealed local road off the Gregory Developmental Road. In the mitigation is being lifted by those operators with decades of on- first year of construction, Adani Mining expects this unsealed local the-ground-experience. road to cope with 25,000 trips by mainly heavy vehicles. During and following high rainfall events, unsealed roads in this region may become unpassable to heavy vehicular traffic.
Figure 36: Yallourn Mine Disaster
Morwell River
Yallourn Mine collapses taking Morwell River with it
Source: Environment Victoria
42 Section 7
Carmichael Coal Project: Economic and Financial Risks (continued)
7.6: Carmichael Coal – revisions from 5. The life of mine capital cost has been reduced from A$21.5bn to A$16.5bn, excluding power and water, but the November 2012 EIS to the November including the 190km of West-East rail option. This reflects 2013 SEIS the lower life, as the total capex includes stay-in-business or maintenance capex covers 60 years rather than 90 years at This report incorporates a number of major revisions to the key a much lower level of production; Carmichael Project assumptions as detailed in the November 2013 SEIS relative to that of the November 2012 EIS. These 6. The SEIS shows construction delayed one year to 2014, with include: operation likewise delayed a year to 2016; 1. The mine life has been shortened from 90 years to 60 years 7. The number of employees for the mine during operation is “due to new exploration results”; raised from 3,000 to 3,800, plus 120 relating to the West- East rail operation; 2. No change to the target of 60Mtpa of saleable coal in the first 20 years of full production. But where the earlier EIS 8. The average water demand increases 30% to 12,000 million had saleable coal rising post 2040 to 65Mtpa till 2090, the litres per annum; and SEIS has peak production of 60Mtpa for 2020-2040, then 9. Total measured, indicated and inferred resource was stepping down to 35Mtpa by 2055 and then to 22Mtpa from downgraded 10% to 10.15bn tonnes. 2060. So rather than being 60Mtpa average over 90 years, the new mine plan is 40Mtpa average over 60 years - a major These revisions will each adversely impact the cash cost of downgrade on both saleable coal and life of mine. In all, a production and / or return on investment over the life of this halving of total saleable coal over the life of the project; Carmichael Project. In combination, the SEIS revisions reinforce our view that the Carmichael Project is not an economic 3. The SEIS references a few “editorial errors” in the earlier EIS proposition. for the mine plan - as a result the SEIS has a total life of mine yield of 79% - down marginally from the EIS level of 96%; 4. The coal handling and preparation plant (CHPP) will wash 75% of ROM coal (up from 30%);
43 Section 8 Broader Dynamics of Global Coal Prices … Continuing to Weaken in 2013 and Beyond
8.1 The short and immediate term Figure 37: Thermal Coal – Australian Newcastle Forward Curve (US$/t) markets The price of thermal coal has taken a step-change downwards over the last year – dropping over 20% yoy (Figure 37) to be down 45% since the start of 2011 – Figure 38. This reflects a large increase in supply, but also significantly downgraded expectations with respect to China’s consumption of coal – driven by increased installation of renewable energy, the prospects for slower economic growth, a significant government response to increased air pollution, significant reductions in the energy intensity of China’s gross domestic product (GDP) growth as the economy transforms towards a more service/consumer orientation and continued improvements in mining efficiency within the country – refer Section 8.4. In addition, a reduction in US coal demand as the electricity sector switches towards renewables and natural gas plus tighter emissions regulations continues to erode the global demand outlook for coal.
Source: Bloomberg, Citi Research
Figure 38: Australian Thermal Coal Price (US$/t)
Description: Thermal coal, 12,000 btu/pound, <1% sulphur, 14% ash, FOB Newcastle, US$/metric ton Source: Indexmundi.comcxi
44 Section 8 Broader Dynamics of Global Coal Prices … Continuing to Weaken in 2013 and Beyond (continued)
The Newcastle 5500kcal NAR … US$62/t a more relevant This statement at first seems totally at odds with the sustained benchmark growth in coal production globally over the last three decades, and the acceleration of production in the decade to 2012 – The Newcastle 5,500kcal NAR was priced in October 2013 at Figure 39. US$62.50/t – well over a US$10/t discount to the traditional Newcastle 6,300kcal GAR (6,080kcal NAR) price of US$79.40/t. However, we see global coal demand and hence production This NAR 5,500kcal standard is probably the better benchmark peaking by the second half of this decade, and forecast a steady for coal pricing for the Galilee Basin thermal coal, given the decline thereafter. The declining demand profile evident in Europe relatively high ash content and the below benchmark energy and North America is already clear, with tighter air emission targets content. This NAR 5,500kcal price is based on 20% ash driving the decommissioning of much of the aging coal-fired power content. Adani Mining forecasts it can get the ash content from generating capacity in both these regions progressively through to Carmichael down from 25-30% ROM to 25% on a net blended 2020. In September 2013 the US Environmental Protection Agency post-washing basis. The Carmichael coal has an energy content issued the latest in emission standards showing an ever tightening of around 5,260kcal NAR (5,400-5,500kcal, GAR) , i.e. below regulatory framework will continue to make fossil fuel energy the new lower quality Newcastle 5,500kcal NAR benchmark. sources an increasingly more expensive source of energy.cxv There has been a long-held view within the more bullish elements of the coal industry that continued growth in demand 8.2 The longer term outlook for coal from Asia would more than offset the decline in the West. production However, this view is becoming less tenable as structural shifts in the key global energy markets accelerate. The decline of the coal era is being forecast by an increasing number of bodies. Bloomberg New Energy Finance in August We would cite two key factors that are increasingly undermining 2013 stated: this proposition of continued demand growth for coal in the Asian region. These are the continued rise of renewable capacity and energy efficiency gains. Additionally, the Energiewende policy has “There seems little doubt that the above driven a rapid transformation of the Germany economy in the last powerful long term pressures will ultimately decade – proof that a rapid decarbonisation of a major industrial dislodge coal from its dominant role in economy is technically and financially feasible. the global power system. It is likely that Should the Carmichael coal project move forward, it will become a tipping point has already been reached commercially operational at a time when coal markets are already oversupplied. The likely impacts will be to drive prices that prevents fresh capital flowing into new in the region down, further undermining the ability of the mine unabated coal.” to cover its costs, and weakening the relative position of other mining interests and energy markets more generally.
Figure 39: Global Coal Production – 1982, 1992, 2002, 2012
Change Share of total Million tonne 1982 1992 2002 2012 12 vs ‘02 2012 China 666 1,116 1,550 3,650 135% 46.4% United States 760 905 993 922 -7% 11.7% India 135 254 358 606 69% 7.7% Indonesia 1 22 103 386 274% 4.9% Russia n/a 337 256 355 39% 4.5% Australia 130 229 341 431 27% 5.5% South Africa 144 174 220 260 18% 3.3% Germany 500 307 208 196 -6% 2.5% Rest of World 1,587 1,216 959 1,077 12% 13.7% Total 3,980 4,519 4,961 7,865 69% 100.0% Source: BP Statistic Review 2013
45 Section 8 Broader Dynamics of Global Coal Prices … Continuing to Weaken in 2013 and Beyond (continued)
8.3 The continued rise of renewables When this growth in solar is coupled with the ongoing installation of some 40GW annually of onshore wind, 20-30GW Solar power generation continues to see rapid cost reductions annually of hydro and the newly emerging offshore wind sector driven by economies of scale and technology innovation. This has adding 5-10GW annually later this decade, this will supplant a growing impact on the profitability and market share of fossil much of the electricity generating capacity growth that was fuel generators. A recent Citi report by Shar Pourreza comments: previously thought could only be supplied by additional coal power capacity. “The disruptive effects of solar are evident… 8.4 China’s energy transformation its extremely rapid learning curves … of around 30% over the longer term … Most China’s power sector is undergoing a rapid transformation. The ongoing gains in energy efficiency and renewable power disruptively, not only does solar steal generation are advancing well beyond the expectations of share of new electricity demand, it does most Western forecasts. The Chinese Government’s renewed parasitically steal demand from previously commitment to reducing air pollution will further accelerate the installed capacity, and does [so] at the most trend away from the use of coal in China. At the same time, large scale investments in infrastructure have seen a significant cxvi valuable ‘peak’ part of the demand curve” improvement in rail freight capacity, thereby lowering Chinese coal transport costs and improving their coal self-sufficiency. We forecast global solar installations will reach 38GW in 2013, Energy Efficiency … China leads the way up 25% yoy, possibly equaling annual wind installations for the first time. In the medium term, we forecast global solar One of the key assumptions underlying the forecast for growth installations to have double digit annual growth to reach 50- in Chinese coal consumption is the rate of growth in Asian 60GW annually by 2015-2016. Wacker Chemie AG, a top three electricity demand. If real GDP growth in Asia is mid to high global producer of polysilicon for solar photovoltaic modules, single digits, historically forecasters assumed electricity demand forecasts 12% annual volume growth through to 2017, placing would grow at or above this growth rate. For the last decade its estimate of global solar installations at 70GW per annum by in China, the ratio of GDP to electricity growth was close to 2017 – Figure 40. 1:1, but this is biased upwards by the exceptional double-digit electricity growth in 2003-2005. However, looking back over the last two decades electricity demand has grown at half Figure 40: Polysilicon Volume Growth of 12% pa to 2017: this rate i.e. 0.5: 1 – Figure 41. Given one of the key targets Solar at 75GW pa of recent Chinese Five Year Plans has been 3-4% pa gains in energy efficiency, if GDP growth is 7% then energy efficiency can deliver half of the otherwise required growth in electricity. As the Chinese economy transforms away from industrial demand towards more consumer- and service-oriented demand, the natural energy intensity of GDP growth should decline as well.
Source: Wacker Chemie AG, September 2013
46 Section 8 Broader Dynamics of Global Coal Prices … Continuing to Weaken in 2013 and Beyond (continued)
Figure 41: Chinese Economic and Energy Demand Growth 1992-2012
Source: CEIC and RHG estimates
A significant upgrade to China’s coal self-sufficiency This would transform the global traded coal market, given China has been importing around 20Mt per month over 2012 and year-to-date 2013. China’s domestic coal production “Thermal-coal markets have suffered from was +3.2% yoy in 2012 to 3,120Mt, yet coal usage in power a permanent structural shift in China’s generation actually declined -0.9% yoy, bringing the country domestic coal logistics as rail capacity has closer to a balanced internal supply-demand profile. Total coal finally become self-sufficient.” consumption in China is +1.4% yoy year-to-date for the first eight months of 2013.cxix Figure 42 details China’s monthly coal Ian Roper, Commodity Strategist, CLSA, August 2013cxviii production volumes – showing a distinct absence of growth since 2010. Stockbroker CLSA forecasts that China’s improved rail coal We note there is currently speculation that China is considering logistics and capacity means a significant reduction of China’s scrapping a 10% tariff on exports of thermal coal from 2014, thermal coal costs of production (rail is significantly more aimed at rebalancing domestic demand-supply.cxx efficient in scale, and hence lower cost, than road transport). This increases the likelihood that China could effectively cease importing thermal coal beyond 2013 (except for opportunistic purchases at low spot prices).
47 Section 8 Broader Dynamics of Global Coal Prices … Continuing to Weaken in 2013 and Beyond (continued)
Figure 42: China’s monthly coal production volumes and year-year growth rates
Source: CEIC, Citi Research
Airborne Pollution Prevention and Control Action Plan China is key to the global thermal coal market outlook China’s Airborne Pollution Prevention and Control Action Plan China has risen from less than 10% of global thermal coal (2013-17) will be the second plan in two years to tackle pollution consumption in 1965 to over 50% by 2012 – Figure 43. As and is backed by 1,700bn yuan (US$277bn) of investment by such, should China manage to deliver on its national target the Chinese central government.cxxi Targeting a 25% reduction in to cap coal consumption by 2017 it would have profound air emissions from 2012 levels in north China, the plan includes implications for the global coal market. a targeted 10% reduction in coal usage in this timeframe. We believe a global dislocation within the coal industry will occur In October 2013 Shanghai announced its Clean Air Action Plan, significantly earlier than most financial and industry participants aiming to reduce the concentration of PM2.5 by 20% by 2017, forecast. The compound effect of the expansion of renewable with a significant focus on stringent emissions controls and energy capacity, energy efficiency and a Chinese Government other policies that will materially reduce the use of thermal coal committed to energy self-sufficiency and reduced air pollution in this city of 24 million people.cxxii make the decline in coal demand inevitable. We forecast Chinese coal-fired power generation will peak in 2016 and decline thereafter – refer Appendix B.
48 Section 8 Broader Dynamics of Global Coal Prices … Continuing to Weaken in 2013 and Beyond (continued)
Figure 43: Chinese Thermal Coal Demand has Surged to Over 50% of the World’s Total Consumption
Source: BP Year Book, Citi Research
8.5 The longer term outlook for coal prices Deutsche Bank’s May 2013 report “Commodities Special Report: Thermal Coal at a Crossroads” provides a market The thermal coal export market has weakened considerably outlook for coal demand and supply, and hence thermal coal over the last two years. This has been driven by increased pricing that reflects these new realities. Deutsche forecasts supply from a number of countries combined with lower than a significant oversupply of thermal coal globally, building expected demand from most importers of coal. One Chinese progressively through 2020. The conclusion of this is that coal producing major recently stated: thermal coal prices are likely to continue to track the global marginal cost curve, as Deutsche Bank’s analysis highlights – “Thermal coal remains in abundant Figure 44. cxxiv availability with no significant cuts in production so far; take-or-pay commitments continue to influence Australian producers. Chinese market is weak with strong competition from domestic production and ample stocks… overall the market remains over-supplied.” Yancoal Australia presentation, 16 August 2013 cxxiii
49 Section 8 Broader Dynamics of Global Coal Prices … Continuing to Weaken in 2013 and Beyond (continued)
Figure 44: Global Thermal Coal FOB Cash Costs, Real Figure 45: Japanese Fiscal Year Thermal Coal Prices 2013 US$/t (Newcastle FOB, US$/t)
Source: BREE, Resources and Energy Quarterly – September 2013 page 30
A robust global market has in the past driven thermal coal prices above US$100/t; however, it is unlikely that this price target will be achieved as a permanent part of the global coal market. Source: AME, Deutsche Bank Research Consensus projections for the long-term thermal coal price based on the marginal cost of production would challenge the The Australian Bureau of Resources and Energy Economics financial viability of Adani Enterprises’ Carmichael project given suggests a similarly subdued outlook – Figure 45. its relatively high cost structure.
50 Section 9 Environmental and Governance Issues
9.1 Environmental issues in coal mining 2011 – Illegal iron ore transportation and bribery and related infrastructure in Australia An investigation by the Karnataka anti-corruption ombudsman (Lokayukta) uncovered that amongst others, Adani Enterprises was actively involved in large scale illegal exports of 5m tonnes “Other port projects in Queensland of iron ore in 2009/10 resulting in “huge” economic losses to are questionable… Further, increasing the government. Documents seized from the Adani Group activism from environmental groups, offices indicated the company had been paying cash bribes farmers’ lobbies, UNESCO and other to officials in the Port Department, Customs, Police, State Pollution Control Board, Weights and Measurement Department interest groups are curbing the ability to and local politicians. These bribes were paid to receive “undue develop new coal mines and ports in the favour for illegal exports”.cxxix There is litigation pending against future. It is Cockatoo’s view that obtaining several directors of the Adani Group relating to violations of the cxxx regulatory approvals for new mine and port Customs Act 1962 and evasion of duties. developments will become increasingly 2011-2012 – Illegal construction difficult over coming years.” The Gujurat High Court found that Adani Power had illegally constructed an intake channel for its plant at Mundra on private Cockatoo Coal’s MD, Andrew Lawson and government land. The Group was ordered to compensate the individual who owned the land.cxxxi A key prerequisite for the expansion of the Abbot Point Port is for a major dredging program to be undertaken by North 2012 – Construction before environmental approval Queensland Bulk Ports Corporation (NQBP) with spoilage to be received dumped in the Great Barrier Reef World Heritage Area. In May The Gujurat High Court found that construction was occurring 2013 NQBP released a Supplementary Report to the Public in Adani Ports’ Mundra SEZ even though the SEZ had not Environment Report for this dredging project, addressing the received environmental approval from the central government 103 submissions from public consultation covering local fishers, of India. The Adani Group was found to have contracts with tourism groups and the community. NQBP revised its planned tenants within the SEZ for rent and maintenance charges for site for dumping three million tonnes of sediment, but has yet to infrastructure facilities despite having no permission to build disclose its new location. The dredging program is yet to receive infrastructure in the SEZ.cxxxii In April 2013 the Mundra SEZ Federal environmental approval under the Environment Protection was found to construct an airstrip and aerodrome without and Biodiversity Conservation Act 1999. Environmental Clearance.cxxxiii In October 2013 the Federal Environment Minister ordered 2012 – Deliberately concealing and falsifying material facts an inquiry into alleged breaches by AAPCT relating to lack of monitoring of vegetation before it was removed and water toxicity The Adani Group was investigated by the Indian Ministry of in stormwater return drains.cxxvii Commerce and Industry after prima facie evidence indicated that the company had “deliberately concealed and falsified material facts” when applying for a 1,840ha SEZ in Mundra.cxxxiv The investigation found that the SEZ did not comply with various 9.2 Environmental, Social and Governance required conditions and in October 2012 the government Issues for the Adani Group in India cancelled the SEZ.cxxxv The Adani Group has a very limited operating history in 2013 – Fined for environmental damage and violations Australia. To gauge its likely business practices, it is relevant Adani Ports commenced commercial operation of its port at to review the Adani Group’s track record in India, where it has Mundra in 2001, and has pursued an aggressive expansion been operating for 25 years across a range of activities in the thereafter. This development has come at significant cost, power, infrastructure and port sectors. A number of issues raise resulting in the destruction of mangroves and severely impacting concerns:cxxviii creeks, mudflats and intertidal areas.
51 Section 9
Environmental and Governance Issues (Continued)
In September 2013 a committee set up by the Ministry of 2001-2013 – A range of civil court cases Environment and Forests recommended that Adani Ports The June 2013 prospectus for Adani PortscxIiii details 18 groups be fined Rs200 crore (US$34m) for damaging protected of civil lawsuits against the company that have been initiated at mangroves, creeks and the local environment.cxxxvi A 2010 various times since 2001 and are still outstanding. To detail one inspection found large scale reclamation using dredging material of the 18 groups, Adani Ports states that: had been carried out on mangrove areas, obstructing tidal flows and large scale destruction of the mangroves in conservation zones.cxxxvii The Adani Ports prospectus of June 2013cxxxviii details “48 land related cases have been filed these committee findings, including: before various courts against the company • diversion and blocking of creeks; on grounds of disputes arising …. • mismanagement of fly ash from the thermal power plant acquisition of land fraudulently or under resulting in emissions and ground water pollution; threat … illegal construction …. Illegal • non-compliance with monitoring and reporting conditions; encroachment of land.”cxIiv • failure to gain clearance to undertake construction activity; and Litigation against Director – violating the Foreign • preventing local fishermen from accessing fishing grounds. Exchange Regulations Act 1973 2013 – “Coalgate” and tigers Adani Ports has also made public that legal proceedings against The Indian Central Bureau of Investigation (CBI) is reviewing a Director are underway for a series of irregularities detected by the Auditor General with respect to the allocation of coal deposits to “leading and influential business houses” within India. In August 2013 the “investments in a wholly owned Indian Supreme Court was informed that most of the relevant subsidiary without prior approval from files from the Coal Ministry remained untraceable.cxxxix The CBI RBI and remittance of overseas agency in October 2013 widened its investigation to include 85 private commission.”cxIv companies and has lodged its status report with the Supreme Court of India.cxI Adani Enterprises is not one of the groups involved, but the entire captive coal mine allocation process is This may relate to a 2012 Bloomberg report stating: on hold until the CBI has resolved its investigation. Adani Power has lobbied hard for years to attain permission to “The Ministry of Home Affairs has for more build an open cut coal mine in Maharashtra. The project was than a year been probing Adani Ports & rejected in 2009 as it was within the buffer zone of the Tadoba- Special Economic Zone Ltd. (ADSEZ) and Andhari Tiger Reserve. The most recent version of the plan would have required the destruction of 1,400 hectares of forest. the source of money transferred to the In 2012 a special committee of Maharashtra forest officials company from Mauritius… possible money rejected clearance again.cxIi laundering”. 2013 – Coal block cancellation Adani Enterprises’ “Lohara coal block was cancelled by Adani Ports was reported to have been denied security Ministry of Environment and Forest (MoEF).”cxlii This coal block clearance for a multipurpose facility in Vizhinjam Kerala and a cxIvi cancellation has been a major impediment to the development bulk-cargo export terminal in Visakhapatnam. of domestic coal for Adani Power’s Tiroda plant, resulting in How serious an issue these various ligation proceedings will significant share price underperformance over a sustained prove to be is unclear, but the recurring nature does suggest period – refer Section 4. The cancellation related to the location further investigation. of the coal block being in a no-go zone i.e. a wildlife corridor for a tiger reserve. Political uncertainty over the fate of private coal mining operators continues to overhang Adani Enterprises’ other proposed mine developments.
52 Section 9
Environmental and Governance Issues (Continued)
Lack of disclosure on safety record representatives to try to gain their consent to the grant of the approvals (the Native Title Approvals). The Adani Group’s various Australian presentations refer to a culture of safety, consistent with the Group’s stated In early December 2012, Adani called a meeting of W&J People policy of “Target Zero Harm and Absolute Compliance”.cxIvii for the purpose of seeking their authorisation of an Indigenous However, supporting evidence in Adani Enterprises’ corporate Land Use Agreement (ILUA) prepared by Adani and without presentations is largely absent on this subject. Whilst it is the consent of W&J leaders. The ILUA would have given standard practice for the leading western mining and rail Adani all of the native title approvals it required to complete freight firms to record and present Lost Time Injury Frequency the project (other than sections of the rail corridor which fell on Rates (LTIFR), there is no such reference by Adani Enterprises’ neighbouring groups’ land). Despite the W&J leaders opposition senior management. Best practice in corporate governance to the meeting Adani proceeded nonetheless. has the CEO and senior executives focus on LTIFR as a key At the meeting, the W&J People voted unanimously to reject performance indicator. As Figure 46 details, Aurizon can Adani’s proposal. Instead, they voted to authorise an alternative demonstrate (and consistently discloses) a focus and strongly agreement that would require Adani to offer a contract to the improving trend: “At Aurizon, safety is a core value and the group to run the mine camp on commercial terms for the life of Company’s number one priority”. the project. The aim of the contract would have been to address chronic unemployment issues within the native title group. Adani has so far rejected this alternative, resulting in a stalemate. Figure 46: Aurizon’s Lost Time Injury Frequency Rate The effect of this rejection and the company’s botched handling of the ILUA meeting, has seen a hardening of opposition to the mine within the group, including on grounds of concerns about cultural heritage and the impact of the mine on ancestral lands. This has led some members of the group to open discussions with environmental opponents of the mine. Adani presently holds Native Title Approval for one of the three mining leases it needs for the Project. It holds none for the associated infrastructure. The lone approval was secured, without the consent of the W&J People, through litigation in the National Native Title Tribunal (NNTT) after negotiations broke down in late 2012. To secure the remaining two mining leases, Adani must once again negotiate with the W&J People. If negotiation is unsuccessful, Adani may then have a right to apply to the NNTT as it previously did. This can be a slow process, and any determination by the NNTT may itself be subject to appeal to Source: Aurizon’s 2012/13 full year result presentation the Federal Court. Without agreement, and in the case of other aspects of the Aurizon also presents a full disclosure of the impact of floods project such as the proposed rail corridor and accommodation and derailments in terms of costs, customer impacts and camp, Adani may need to rely upon the State of Queensland consequences. Adani either doesn’t incur similar events or, undertaking a compulsory acquisition of the W&J People’s more likely, doesn’t consider disclosure of these issues pertinent native title. Compulsory acquisition is a contentious and to its social licence to operate. complex process which can take years to complete. Legal challenges from traditional owners, and others opposed to any compulsory acquisition of their property, should be expected in 9.3 Issues relating to Traditional Owners: this event. Native Title Status Report Adani’s Carmichael Coal Project (the Project) is to be located on an area covered by a registered native title claim made by the Wangan and Jagalingou people (the W&J People). Under the Native Title Act, to secure many of the necessary approvals for the project, including the three mining leases required for the project, Adani must negotiate with the W&J People’s
53 Section 10 Australian Projects: Logistics and Delays
The Adani Group has suffered a number of setbacks to each of Transmission Authority referenced that Adani had indicated coal its various Australian expansion timetables, as outlined below. production would commence by 2016/17. Given a 3-4 year construction timetable,cIv we would suggest 2017 is the earliest Dudgeon Point Port: In its first Australian initiative, the Adani date coal could be sold from the Carmichael mine, assuming Group in 2009 was selected as one of the two preferred the railway, power and water lines are constructed by then. proponents for the development of a 90Mtpa capacity coal export port (over three stages) to service the Galilee and Bowen In October 2011 Adani presented its East-West 190km rail Basins at Dudgeon Point Port. Stage 1 was to commence link to the Goonyella rail system, stating construction would operation in 2014. Combined with an equivalent 90Mtpa commence in January 2013 and operations from October 2014. development by Brookfield Infrastructure Group, this was to be cIvi In May 2013 Adani lodged the EIS application for its A$2.2bn a A$12bn greenfield project. “North Galilee Basin Rail Project” option, which was then opened for public consultation.civii With a rail construction period However, by June 2013 NQBP’s general manager of planning of 2-3 years, this means rail access to Carmichael will not be for Hay Point, Bob Brunner, said: available until 2016 at the earliest. In May 2012, the Australian head of Adani Enterprises, Mr Jignesh “Because of the downturn in the Derasari exited the firm. The press at the time suggested this coal market, a number of new mine related to delays in the development of the Carmichael project, developments in the Mackay region have although the company cited “personal reasons”.cIviii been recently cancelled or deferred”. AAPCT T1: When Adani leased Abbot Point Port’s T1 in June 2011, the terminal was operating at 35% of its stated 50Mtpa The construction start date for the proposed facility has now coal export capacity. Adani announced the capacity was fully cIix been put back until late 2015 as a result and staff reassigned, contracted under take-or-pay contracts. To date (latest figures pushing out any commissioning to beyond 2018.cxIix This is are September 2013), T1 has only operated at a maximum similar to Glencore Xstrata’s decision to cease development in moving annual total of 19Mtpa rate, or 38% utilisation. May 2013 of its proposed A$1bn 35Mtpa greenfield coal export Abbot Point T0: In May 2012 Adani detailed its plans for terminal at Balaclava Island, 40km north of Gladstone, citing: the Abbot Point T0 coal terminal, with Stage 1 at 35Mtpa of capacity, with a Stage 2 expansion to possibly 70Mtpa. This “The decision has been made as a result expansion would primarily serve the Carmichael mine, but is proposed to be open to other coal export customers. Adani of the poor current market conditions in submitted its draft EIS for the project in February 2013 and its the Australian coal industry, excess port final EIS in June 2013. The project has yet to receive approval capacity in Queensland, specific shipping by the federal Department of the Environment and a decision is cIxii limitations and concerns about the due by 13 December 2013. The latest construction timetable from Adani states construction commencing in Q4 2013 with cI industry’s medium term outlook.” the terminal’s operations targeted to commence in 2016. Abbot Point T4-7: In October 2011 Adani announced it Carmichael Coal Deposit: In June 2010 Adani acquired the had submitted an expression of interest for the Abbot Point Carmichael deposit. In October 2011 Adani presented plans Terminal T4-7, a 30Mtpa multi-cargo facility.cIxii This project was for 50Mt of overburden removal in 2013 and coal production subsequently cancelled. commencing in 2014.cIi In September 2012 Mr Gautam Adani stated “Our Australian plan is completely on the dot, as per Clermont Mine: It was reported in September 2013 that Adani schedule”.cIii However, by December 2012 Mr Adani stated Enterprises was one of three bidders for Rio Tinto’s 50.1% “production from the mine is likely to start from 2015 and is stake in the 10Mtpa Clermont thermal coal mine in Queensland. expected to reach its peak at 60Mtpa by 2022.”cIiii The May However, in October 2013 Rio announced it had finalised a sale cIxiv 2013 North Galilee Basin Rail proposal from Adani pushed to Glencore Xstrata/Sumitomo for US$1.02bn. out first coal production to 2016.cIiv The State Government announcement in August 2013 relating to Adani Group’s
54 Section 10
Australian Projects: Logistics and Delays (continued)
Conclusion We view Adani Enterprises’ development of the Carmichael deposit as an uneconomic proposition. The low energy and high ash content are major constraints to the value of the coal. The remote location and lack of infrastructure will significantly add to the cost of mining and transporting the coal to market. The financial leverage within the Adani Group adds significant financial risk to this project while the lack of relevant management experience in Australian coal mining further raises the operating risk profile. The Adani Group has an excellent ports and logistics business in India; the distraction of a major expansion outside the geographic and product expertise of the Group is likely to continue to erode shareholder value.
55 Appendix A: Abbreviations and Acronyms
Our terminology Legal vehicle Details AAPCT Adani Abbot Point Terminal The Adani family owns AAPCT (“T1”), acquired in March 2013 from Adani P/L Ports. Abbot Point Coal Port Abbot Point Port consists of the existing AAPCT T1 facility, plus a multitude of proposed expansions by AAPCT (“T0”), BMA (“T2”), GVK Hancock (“T3”) and more recently “T4” by either Aurizon and Lend Lease, or Anglo Coal Adani Enterprises Adani Enterprises Limited The senior listed entity owned 76% by the Adani Group. Adani Enterprises owns 64% of Adani Power and 78% of Adani Ports. Adani family The Adani family group of unlisted companies, which together own 76% of Adani Enterprises Limited, as well as Abbot Point Coal Port T1. Adani Ports Adani Ports and SEZ Limited 75% owned by Adani Enterprises, Adani Ports is a listed company that is the largest private port owner / operator in India. Adani Power Adani Power Limited The listed entity owning the Adani power stations, as well as owning the Carmichael Deposit. Adani Mining Adani Mining Pty Ltd A 100% owned Australian subsidary of Adani Global P/L of India, which is in turn 100% owned by Adani Enterprises. Adani Mining owns the Carmichael Thermal Coal Deposit, Central Queensland. Aurizon Aurizon Holdings Ltd The recently privatised and ASX-listed Queensland railway business, 70% focused on transporting coal from the Bowen and Surat Basins to the Queensland ports of Abbot Point, Gladstone and Hay Point. Carmichael Coal Adani Mining Pty Ltd A subsidary company of Adani Enterprises Limited. Owner of the ‘Carmichael Coal Mine and Rail Project’. Crore Indian semantic for 10 million in international numerical terms. EPBC Act Environment Protection and Biodiversity Conservation Act 1999. GVK Power GVK Power & Infrastructure A listed Indian conglomerate proposing to develop the Alpha Coal mine Ltd and rail project in the Galilee Basin to the south of the Carmichael deposit. GW Gigawatt A measure of electricity capacity, 1GW is 1,000 Megawatts (MW). Lakh Indian semantic for 100,000 in international numerical terms. IPO Initial public offering The process of listing a company on the stock exchange, in Adani’s case this is usually Bombay Stock Exchange (BSE). Mtpa Million tonne per annum Mundra Port Mundra Port and SEZ Ltd Adani Ports and SEZ Ltd changed its name from Mundra Port and SEZ Ltd in Jan 2012. North Galilee Basin Rail project Adani Mining Pty Ltd A proposed greenfield 300km standard gauge railway to Abbot Point Port. NQBP North Queensland Bulk Ports A Queensland Government owned entity. Corp. QR National Ltd Aurizon Holdings Ltd QR National P/L changed its name as Aurizon post its 2011 initial public offering. For consistency, this report refers to this group solely to Aurizon. RBI Reserve Bank of India ROM Run-of-mine coal A term for the gross output of a coal mine. The volume generally falls as the raw product is put through the coal handling and processing plant and washed, plus overburden removed. The net coal output is called product or saleable coal, with the ratio referred to as the mine yield. SEWPaC Commonwealth Department of Sustainability, Environment, Water, Population and Communities.
56 Appendix B: China Electricity Sector – 2010 to 2020F
Fuel Breakdown - PRC
Cummulative Capacity (GW) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 % Coal 683 733 777 814 839 859 869 867 855 838 816 47% Natural Gas 26 33 39 46 53 61 69 78 88 98 108 6% Hydro 216 231 246 267 284 301 318 335 352 369 386 22% Nuclear 11 13 13 17 21 26 32 39 47 55 63 4% Wind Power - onshore 43 60 73 86 103 120 136 152 167 182 197 11% Wind Power - off-shore 0 0 0 1 1 3 5 9 13 19 27 2% Solar Power 1 3 8 17 29 42 57 71 87 103 120 7% Other (Biomass, EfW, CHP) 4 5 6 7 9 11 13 16 19 23 30 2% Year End 984 1,077 1,163 1,255 1,338 1,422 1,499 1,567 1,628 1,687 1,747 100%
Fuel Breakdown - PRC Net Capacity Additions (GW) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Coal 62.2 54.0 44.6 37.0 25.0 20.0 10.0 -2.0 -12.0 -17.0 -22.0 Natural Gas 6.4 6.2 6.0 7.0 7.0 8.0 8.5 9.0 9.5 10.0 10.0 Hydro 19.3 14.5 15.5 21.0 17.0 17.0 17.0 17.0 17.0 17.0 17.0 Nuclear 1.7 1.7 0.7 3.2 4.0 5.0 6.0 7.0 8.0 8.0 8.0 Wind Power - onshore 17.0 17.6 12.8 13.2 16.6 16.6 16.5 16.0 15.5 15.0 14.5 Wind Power - off-shore 0.2 0.5 0.5 1.5 2.5 3.5 4.5 6.0 8.3 Solar Power 0.5 2.0 5.0 9.2 11.7 13.5 14.3 14.8 15.4 16.4 16.9 Other (Biomass, EfW, CHP) 1.0 1.0 1.1 1.3 1.6 2.0 2.4 2.8 3.2 3.6 4.0 Year End 108.2 97.0 85.9 92.3 83.4 83.5 77.1 68.0 61.0 58.9 56.6
Fuel Breakdown - PRC Hours pa operation 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Coal 5,031 5,294 5,135 5,060 5,060 5,080 5,080 5,080 5,080 5,080 5,080 Natural Gas 3,000 3,000 3,000 3,000 3,000 3,000 3,040 3,080 3,120 3,160 3,200 Hydro 3,404 3,028 3,000 3,263 3,263 3,263 3,263 3,204 3,204 3,204 3,210 Nuclear 7,924 7,772 7,772 7,823 7,823 7,823 7,823 7,823 7,823 7,806 7,817 Wind Power - onshore 2,047 1,907 1,840 1,895 1,982 2,000 2,030 2,060 2,090 2,120 2,150 Wind Power - off-shore 3,000 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 Solar Power 1,400 1,500 1,500 1,500 1,500 1,500 1,520 1,540 1,560 1,580 1,600 Other (Biomass, EfW, CHP) 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750
Fuel Breakdown - PRC Hours pa operation 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 % Coal 3,281 3,737 3,878 4,028 4,184 4,315 4,391 4,412 4,376 4,303 4,203 60% Natural Gas 70 89 107 126 147 170 197 227 258 293 328 5% Hydro 702 676 715 837 899 955 1,010 1,046 1,101 1,155 1,212 17% Nuclear 79 91 101 117 145 180 223 274 332 394 457 7% Wind Power - onshore 70 98 101 121 169 211 249 288 327 367 408 6% Wind Power - off-shore 0 1 3 6 13 22 35 52 75 1% Solar Power 1 3 8 19 34 53 75 98 123 150 178 3% Other (Biomass, EfW, CHP) 13 17 21 25 31 38 46 56 67 80 105 2% Power production (M MWh) 4,216 4,711 4,930 5,274 5,612 5,928 6,204 6,423 6,620 6,792 6,966 100%
Electricity Output Growth * 15.1% 11.7% 4.7% 7.0% 6.4% 5.6% 4.7% 3.5% 3.1% 2.6% 2.6% GDP Growth 10.3% 9.2% 7.5% 7.5% 7.3% 7.0% 6.7% 6.4% 6.0% 5.6% 5.1% Electricity Output vs GDP Growth * 1.47 1.28 0.62 0.93 0.89 0.81 0.70 0.56 0.52 0.47 0.50
* Net of energy efficiency gains of 3% pa or 16% over the 2015 vs end 2010 levels (12th Five Year Plan) Source: Authors’ estimates
57 Appendix C: Adani Enterprises Ltd - Top 35 Shareholder listing
Investor Name Current Position % of total 1 S B Adani Family Trust 621,197,910 56.48 2 Adani Properties Pvt. Ltd. 99,491,719 9.05 3 Adani (Vinod Shantilal) 90,749,100 8.25 4 Janus Capital Management LLC 26,061,085 2.37 5 Capital International, Inc. 16,387,800 1.49 6 Elara Capital Plc 16,081,880 1.46 7 HSBC Global Asset Management (India) Private Ltd 15,801,251 1.44 8 M. M. Warburg Bank (Schweiz) AG 14,701,610 1.34 9 Gudami International Pte. Ltd. 13,980,900 1.27 10 HSZ (Hong Kong) Limited 13,636,973 1.24 11 Citigroup Inc 11,494,969 1.05 12 Gautam S Adani Family Trust 8,836,750 0.8 13 The Vanguard Group, Inc. 7,479,140 0.68 14 Dimensional Fund Advisors, LP 3,740,318 0.34 15 BlackRock Institutional Trust Company, N.A. 2,448,034 0.22 16 T. Rowe Price Associates, Inc. 1,017,705 0.09 17 Mellon Capital Management Corporation 923,649 0.08 18 Parametric Portfolio Associates LLC 794,900 0.07 19 Jupiter Asset Management Ltd. 735,000 0.07 20 Shah (Rakesh R) 611,080 0.06 21 Lyxor Asset Management 608,374 0.06 22 BlackRock (Singapore) Limited 566,367 0.05 23 CPP Investment Board 561,000 0.05 24 Birla Sun Life Asset Management Company Ltd. 545,884 0.05 25 Caisse de Depot et Placement du Quebec 495,116 0.05 26 TIAA-CREF 298,832 0.03 27 DB Platinum Advisors 202,721 0.02 28 Shah (Priti R) 196,000 0.02 29 Pictet Asset Management Ltd. 195,308 0.02 30 KBC Fund Management Limited 177,869 0.02
Source: Thomson Reuters Analytics, downloaded 7 October 2013.
58 Appendix D: Adani Abbot Point Terminal P/L - Banking Syndicate
As of 31 March 2012, the banking syndicate to AAPT P/L consisted of: Commonwealth Bank of Australia 298.4 National Bank of Australia 222.7 Westpac Banking Corp. 200.4 The Bank of Tokyo-Mitsubishi UFJ 133.6 Mizuho Corporate Bank 89.1 Standard Chartered Bank 89.1 OCBC Bank Singapore 66.8 Total loan facility (A$m) (1) 1,100.0 Loan facility - State Bank of India (US$m) 800.0
(1) Interest on this A$ denominated loan was BBSY +2.75%. The loans are repayable over the September 2014 to March 2017 period. Sources: Adani Abbot Point Terminal P/L filing with ASIC 31 July 2012, Adani Enterprises Limited Annual Report 2012/13 page 158.
The June 2013 Adani Ports prospectus (page 33) details that as of 31 March 2013, the AUD loan facility had been extended in size to A$1,250m (drawn to A$1,140m) with an extended five years to maturity. The US$800m loan from State Bank of India as at 31 March 2013 was reported to have a term of seven years.
59 End notes
i viii Ben Sharples, ‘Coal falling most since 2009 prompts Goldman Adani Abbot Point Terminal Pty Ltd ‘Investor Presentation’, Cut’, Bloomberg, 8 August 2013,.For more detail see: April 2013, p. 12. http://www.businessweek.com/news/2013-08-08/coal-falling- ix most-since-2009-prompts-goldman-cut-energy-markets All equity market capitalisation and performance numbers are ii based on the prevailing share prices and currency rates as at Tom Sanzillo & Tim Buckley, Stranded: Alpha Coal Project in 27 October 2013, which were: Australia’s Galilee Basin, Institute for Energy Economics and • Adani Enterprises Ltd Rs194 Financial Analysis, 19 June 2013. For more detail see: • Adani Ports & SEZ Ltd Rs144 http://www.ieefa.org/report-stranded-alpha-coal-project-in- • Adani Power Ltd Rs33.45 australias-galilee-basin/ • Rupee to USD 61.45:1 iii • USD to AUD 0.959:1 Linc Energy ‘Linc sells Galilee Coal Tenement for $3 billion’, • Thermal coal price Oct 2013 US$79.40 Newcastle Spot ASX Announcement, 3 August 2010. For more detail see: (NAR, 6,080kcal) http://ss01.boardroomradio.com/files/LNC/LNC20100804.pdf • Thermal coal price Oct 2013 US$62.50 Newcastle Spot (NAR, 5,500kcal) iv Jon Condon, ‘Moray sale heightens ‘two-speed economy’ x claims’, Beef Central, 16 February 2012. For more detail see: Adani Group presentation, 20 August 2013, Slide 12. For http://www.beefcentral.com/p/news/article/1244#sthash. more detail see: http://www.adani.com/Common/Uploads/ JN8Ic4rY.dpuf InvestorRelationTemplate/2_InvBotDL_Adani%20Group%20 Presentation%20Aug%2013.pdf v Bede Boyle, Australian Coal Export Forecast to 2015 - xi Responding to Strong Demand from China and India, AustCoal Adani, ‘Adani Abbot Point Terminal’, Townsville Industry breakfast Consulting Alliance Client Briefing, December 2010. For more Presentation, 6 August 2013, p. 4. For more details see: details see: http://austcoalconsulting.com/downloads/1%20 http://townsvilleenterprise.com.au/Townsville%20Industry%20 Australian%20Coal%20Export%20Forecast%20to%202015.pdf Breakfast%20Presentation%20-%2005082013.pdf vi xii ‘Vale to sell Qld coal mine’, Business Spectator, Adani Group, Adani Group presentation, 20 August 2013, 1 July 2013. (This is an AAP story). For more detail see: Slide 2. For more detail see: http://www.adani.com/Common/ http://www.businessspectator.com.au/news/2013/6/30/ Uploads/InvestorRelationTemplate/2_InvBotDL_Adani%20 vale-sell-qld-coal-mine Group%20Presentation%20Aug%2013.pdf vii xiii Adani, ‘Adani Abbot Point Terminal’, Townsville Industry Adani Mining P/L 2012/13 annual accounts as lodged with ASIC Breakfast Presentation, 6 August 2013, p. 4. For more on 22 April 2013. details see: xiv http://townsvilleenterprise.com.au/Townsville%20Industry%20 Adani Group presentation, 20 Aug 2013, Slide 14. For Breakfast%20Presentation%20-%2005082013.pdf more detail see: http://www.adani.com/Common/Uploads/ InvestorRelationTemplate/2_InvBotDL_Adani%20Group%20 This US$30bn market capitalisation reference is also included Presentation%20Aug%2013.pdf in Adani’s North Galilee Basin Rail Initial Advice Statement, May 2013, section 1.4. For more details see: xv http://www.dsdip.qld.gov.au/resources/project/ Adani Mining Pty Ltd 2012/13 annual accounts as lodged with north-galilee-basin-rail/ngbr-ias.pdf Australian Securities and Investment Commission (ASIC) on 22 April 2013. xvi Adani Power Ltd, ‘Financial Result 4QFY213 and FY13’, May 2013.
60 End notes (continued)
xvii xxv Utpal Bhaskar, ‘Bhel sends legal notices to recover ‘PFC withdraws RFQ for Surguja UMPP in Chhattisgarh’ The Rs.17,000 crore in dues’, Livemint, 16 September 2013. Hindu Business Line, 16 October 2013. For more detail see: For more detail see: http://www.livemint.com/Industry/ http://www.thehindubusinessline.com/companies/pfc-withdraws- jCFU6Vu3UNMkbqYkPnipnI/Bhel-sends-legal-notices-to- rfq-for-surguja-umpp-in-chhattisgarh/article5239919.ece recover-17000-crore-in-dues.html?ref=mr xxvi xviii Adani Enterprises Limited, Annual Report 2012/13, p. 158, note Mark Gresswell, ‘Indian thermal coal imports’, Energy Global, 43c (iii). 29 July 2013. For more detail see: http://www.energyglobal. xxvii com/news/special-reports/articles/Salva_Report_India_power_ Adani Ports & SEZ Limited, Annual Report 2011/12, p. 105, tariff_regulations_and_thermal_coal_demand_285.aspx#. note 6 (17) VII and VIII. Umyt2xy4bZ4 xxviii xix Adani Enterprises Limited, Annual Report 2012/13, p. 156, ‘Apex court admits Adani plea on power supply pact’, The note 42b. Hindu Business Line, 13 August 2012. For more detail see: http://www.adanipower.com/AdNews/16/1/2012 xxix ‘XE Currency Charts (USD/INR)’, Xe.com. xx For more detail see: http://www.xe.com/currencycharts/ Sudheer Pal Singh, ‘Arguments heating up over Adani, ?from=USD&to=INR&view=10Y Tata compensatory tariff cases’, The Business Standard, 7 November 2013. For more detail see: http://www.business- xxx standard.com/article/economy-policy/arguments-heating-up-in- Dev Chatterjee, ‘Adani pins hopes on dollar revenues from adani-tata-compensatory-tariff-cases-113110600561_1.html ports’, Business-Standard.com, 29 August 2013. For more detail see: http://www.business-standard.com/article/ xxi companies/adani-pins-hopes-on-dollar-revenues-from- Mike Thakkar, ‘Over 30 distressed power projects on block, ports-113082800410_1.html big companies uninterested’, The Economic Times, 4 October 2013. For more detail see: http://economictimes.indiatimes. xxxi com/news/news-by-industry/energy/power/over-30-distressed- Greenpeace/Tom Jefferson, ‘Abbot Point, Qld’, Flickr, power-projects-on-block-big-companies-uninterested/ http://www.flickr.com/photos/beyondcoalandgas/9305190334/ articleshow/23478291.cms in/set-72157634753467059 xxii xxxii Mark Gresswell, op cit. Adani Investor Presentation – 16 June 2012, p. 18. xxiii xxxiii Ashish Fernandes & Tom Sanzillo, September 2013, Coal India: Laura Eadie, ‘Too Many Ports in a Storm: The risks of Running on Empty? CIL’s extractable coal reserves could be Queensland’s port duplication’, Centre for Policy exhausted in 17 years, Institute for Energy Economics and Development, November 2013. For more detail see: Financial Analysis, September 2013. For more detail see: http://cpd.org.au/wp-content/uploads/2013/11/ http://www.ieefa.org/report-coal-india-running-on-empty/ CPD_OP32_Too_Many_Ports-2013.pdf xxiv xxxiv Planning Commission, Twelfth five year plan (2012-2017), North Queensland Bulk Ports Corporation, “Abbot Point Port: Government of India, Volume I, Faster, Sustainable and Port Throughput”, North Queensland Bulk Ports Corporation More Inclusive Growth: An Approach to the 12th Five website, accessed November 2013. For more detail see: Year Plan, August 2011, Section 3.16 Coal Prices and http://www.nqbp.com.au/abbot-point/#throughput Section 3.17 Electricity prices, p. 44. For more detail see: xxxv http://planningcommission.gov.in/plans/planrel/12thplan/ Adani Enterprises Limited, Annual Report 2012/13, p. 154. pdf/12fyp_vol1.pdf
61 End notes (continued)
xxxvi xIvi Jeanette Rodrigues & Ye Xie, ‘India Fighting Worst Crisis Since Natalie Poyhonen, ‘Federal Minister delays Abbot Point coal ’91 Seeks to Buoy Rupee’, Bloomberg, 13 August 2013. For decision’, ABC News, 9 July 2013. For more detail see: more detail see: http://www.bloomberg.com/news/2013-08-14/ http://www.abc.net.au/news/2013-07-09/federal-minister- india-restricts-foreign-exchange-outflows.html delays-abbot-point-coal-decision/4807568 xxxvii xIvii Adani Enterprises Limited, Annual Report 2012/13, p. 155. Deputy Premier, Minister for State Development, Infrastructure and Planning, Jeff Seeney, ‘Rudd remains an xxxviii indecisive dud’, Media Release, Queensland Government, Adani Ports release to the Bombay Stock Exchange, 9 August 2013. For more detail see: http://statements.qld.gov. 3 May 2011. au/Statement/2013/8/9/rudd-remains-an-indecisive-dud xxxix xIviii Adani Abbott Point Terminal P/L 2012/13 annual accounts, Federal Envrionment Department, Assessment Process Notice: as lodged with ASIC 17 May 2013. Extension of time in which to make a decision whether to approve xI a controlled action. For more detail see: http://www.environment. QR Network P/L, 2009 Coal Rail Infrastructure Master Plan, gov.au/cgi-bin/epbc/epbc_ap.pl?name=current_referral_ October 2009, p. 33. For more detail see: detail&proposal_id=6213 http://www.ncc.gov.au/images/uploads/DERaQRAp-005.pdf xIix xIi Brian Williams, ‘Plan to cut Abbot Point dredging rejected Adani Group, “Coaltrans Conference Brisbane”, by State Government’, The Courier-Mail, 4 November 2013. 12 August 2013. For more detail see: http://www.couriermail.com.au/news/ queensland/plan-to-cut-abbot-point-dredging-rejected-by- xIii state-government/story-fnihsrf2-1226752347684 North Queensland Bulk Ports Corporation, ‘Abbot Point Port’, North Queensland Bulk Ports Corporation website, retrieved 28 I October 2013. For more detail see: http://www.nqbp.com.au/ Conor Duffy, “Conflict of interest threatens Great Barrier Reef”, abbot-point/ ABC 7.30 Report, 29 October 2013. For more detail see: http://www.abc.net.au/7.30/content/2013/s3879733.htm xIiii BTM WBM, “Adani Mining Turns to BMT for Ii Detailed Engineering Design” BTM website, accessed The Hon. Greg Hunt MP, Minister for the Environment, Novermber 2013. For more details see: http://www.bmtwbm. “Doorstop with Ken O’Dowd, Member for Flynn, Marina Service com/news/article/home/63757/adani-mining-turns-to-bmt-for- Wharf, Gladstone Marina: Transcript”, 30 October 2013. detailed-engineering-design http://www.environment.gov.au/minister/hunt/2013/pubs/ tr20131030.pdf xIiv Department of Transport and Main Roads, ‘Coal transport Iii infrastructure development’, Queensland Government, Mike Cooper, ‘Australia’s Dudgeon Point coal terminal project Department of Transport and Main Roads website, delayed on global demand’, Platts, 26 June 2013. For more accessed 9 September 2013 For more detail see: detail see: http://www.platts.com/latest-news/coal/Perth/ http://www.tmr.qld.gov.au/business-industry/Transport-sectors/ Australias-Dudgeon-Point-coal-terminal-project-27125341 Multimodal-coal-and-minerals-infrastructure.aspx#abbot Iiii xIv Tom Sanzillo & Tim Buckley, op cit. Aurizon Holdings, ‘Joint Aurizon and Lend Lease bid shortlisted Iiv for Abbot Point coal expansion’, Media Release, 10 April 2013. Adani Mining Pty Ltd, Adani’s North Galilee Basin Rail Initial For more detail see: http://www.aurizon.com.au/Media/ Advice Statement, section 1.6.2, May 2013, p. 9. For more MediaRelease/Pages/Abbot-Point-Expansion.aspx details see: http://www.dsdip.qld.gov.au/resources/project/ north-galilee-basin-rail/ngbr-ias.pdf
62 End notes (continued)
Iv Ixiv Lance Hockridge, Aurizon CEO, ‘Silver lining to our wide brown James Moutafis, Senior Vice President, Coal Business land’, Courier Mail, 31 May 2013, Paywalled. Development, Aurizon, “Co-ordinated Rail and Port Development”, Presentation at the International Cargo Handling Ivi Coordination Association, 5 June 2013, p. 6. Adani Mining Pty Ltd, Adani’s North Galilee Basin Rail Initial Advice Statement, May 2013, section 1.5.2, p. 6. For more Ixv details see: http://www.dsdip.qld.gov.au/resources/project/ Michael Parker & Purdy Ho, ‘Asian Coal & Power: Less, less, north-galilee-basin-rail/ngbr-ias.pdf less … The beginning of the end of coal’, Bernstein Research, 17 June 2013, p. 24. Ivii Department of State Development, Infrastructure and Planning, Ixvi “North Galilee Basin Rail Project”, Department of State Greg Roberts, ‘Adani to mine low quality coal: analyst’, Sydney Development, Infrastructure and Planning website, accessed Morning Herald, February 14 2012. (This is an AAP story). November 2013. For more detail see: http://www.dsdip.qld.gov. For more detail see: http://news.smh.com.au/breaking-news- au/assessments-and-approvals/north-galilee-basin-rail-project. business/adani-to-mine-low-quality-coal-analyst-20120214- html 1t3uu.html Iviii Ixvii Elisabeth Behrmann, ‘Australia’s $32 Billion Galilee Coal Basin James O’Connell, ‘Are lower prices having an impact on Needs Joint Rail, Vale Says’, Bloomberg, 23 November 2011. Chinese coal demand?’, Platts, July 16, 2013. For more detail For more detail see: http://www.bloomberg.com/news/2011- see: http://www.platts.com/Videos/2013/July/china-demand 11-23/australia-s-32-billion-galilee-coal-basin-needs-joint-rail- Ixviii vale-says.html Adani Abbot Point Terminal, Townsville Industry Breakfast Iix Presentation, 6 August 2013, slide 9. ‘Vale to sell Degulla mine as coal price falls’ The Australian, Ixix 1 July 2013. (This is an AAP story). For more detail see: Adani Mining EIS Chapter 2, “Description of the project”, p. 17. http://www.theaustralian.com.au/business/mining-energy/ For more detail see: http://www.adanimining.com/Common/ vale-to-sell-degulla-mine-as-coal-price-falls/story- Uploads/EISDocuments/71_EISDoc_Project%20Description.pdf e6frg9df-1226672230219 Ixx Ix Adani Group presentation at Brisbane Mining Club, 25 October QR Network P/L, op cit. 2012, “An Update”, Slide 18. For more detail see: Ixi http://www.brisbaneminingclub.com.au/event_archive_pdfs/ QR Network P/L, op cit. 2012/Adani%20Group%20Pesentation_SV_25102012.pdf Ixii Ixxi QR Network P/L, op cit. Yogendra Shama, Director Rail, Adani Mining Pty Ltd, ‘Adani Group in Australia’ 8 May 2012. Ixiii Queensland Resources Council, ‘Coal railway network price hike Ixxii untenable’, State of the Sector, September Quarter 2013, p. 1. Samir Vora, ‘Adani Group in Australia’, MAIN Members For further details see: https://www.qrc.org.au/01_cms/details. Breakfast, 7 October 2011. For more detail see: asp?ID=3345 http://dpwealth.com.au/media/adani_presentation_2011.pdf Ixxiii GHD, Carmichael Coal Mine and Rail Project, Executive Summary, Adani Mining, p. E-iv. For more detail see: http://www.dsdip.qld.gov.au/resources/project/carmichael/ carmichael-coal-mine-and-rail-executive-summary.pdf Ixxiv Ibid.
63 End notes (continued)
Ixxv Ixxxvi Adani Group presentation at Brisbane Mining Club, “Labour costs and productivity”, AME Feature Article, 25 October 2012, “An Update”, Slide 18. October 2013. For more details see: http://www.ame.com.au/ Website/Content/Feature%20Article/Details/Index.html?faId=33 Ixxvi Government of India, Ministry of Environment and Forests, Ixxxvii 5 February 2013. For more detail see: http://envfor.nic.in/assets/ Gordon Sparrow, Op. cit. om-050513.pdf Ixxxviii Ixxvii Department of State Development, Infrastructure and Planning, Siddhartha P Saikia, ‘Green trouble for Adani’s $10-b ‘Galilee Basin Development Strategy’, November 2013. For investment in Australian coal mine’, The Hindu more details see: http://www.dsdip.qld.gov.au/resources/plan/ Business Line, 11 April 2013. For more detail see: galilee-basin-strategy.pdf http://www.thehindubusinessline.com/companies/green- Ixxxix trouble-for-adanis-10b-investment-in-australian-coal-mine/ Goldman Sachs Global Investment Research, Australia: Metals article4606867.ece?homepage=true&ref=wl_home & Mining, 24 July 2013 p. 9. Ixxviii xc EIS “Carmichael Coal Mine and Rail Project”, Description of the EIS “Carmichael Coal Mine and Rail Project”, Conclusions and Project, Volume 2, Section 2 p. 4. Recommendations, Volume 1, Section 12 page 2. Ixxxix xci Initial Advice Statement, GHD and Adani - “Carmichael Coal Adani ‘Adani completes Australia’s largest coal mining Mine and Rail Project”, p. 8, Section 3, 22 October 2010. For exploration programme at the Carmichael Mine in record time’ more detail see: http://www.dsdip.qld.gov.au/resources/project/ Media release, 2 December 2012. For more details see: carmichael/initial-advice-statement.pdf http://www.adani.com/AdNews/59/2/2012 Ixxx xcii Initial Advice Statement, GHD and Adani - “Carmichael Coal Adani Abbot Point Terminal Pty Ltd “Investor Presentation”, Mine and Rail Project” p. 8, Section 3, 22 October 2010. For p. 9, April 2013. more detail see: http://www.dsdip.qld.gov.au/resources/project/ carmichael/initial-advice-statement.pdf xciii Parag Gupta, Adani Power:Potential Leader of the Pack, Ixxxi Morgan Stanley Research, 25 February 2010, p. 26. For more “Is 5,500 NAR thermal coal’s new benchmark’, details see: http://www.adanipower.com/Common/Uploads/ AME Feature Article, May 2013. . For more details see: FinanceTemplate/3_FFReport_25%20Feb%202010.pdf http://www.ame.com.au/Website/Content/Feature%20Article/ Details/Index.html?faId=26 xciv Adani Power, Unaudited Financial Results for the Quarter/Six Ixxxii Months Ended 30 September 2013, Adani Power, 25 October EIS “Carmichael Coal Mine and Rail Project”, Description of the 2013. For more details see: http://adanipower.com/Common/ Project, Volume 2, Section 2 p. 42. Uploads/FinanceTemplate/2_FFReport_Qtr2%20Results_APL.pdf Ixxxiii xcv Daniel Morgan, Simon Mitchell, Coal’s rail solution for the Adani Investor Presentation, 16 June 2012. For more Galilee, UBS Investment Research, 25 March 2013. details see: http://www.adani.com/Common/Uploads/ Ixxxiv InvestorRelationTemplate/2_InvBotDL_Adani%20Group%20 Gordon Sparrow, Executive Director, Westpac Institutional Bank, Presentation%20Aug%2013.pdf ‘Strength of the AUS$: Impact on competitiveness of Australian xcvi coal’, Presentation to the Coaltrans conference, August 2013. Adani Enterprises Limited 2008/09 Annual Report, p. 19. For Ixxxv more details see: http://www.adani.com/Common/Uploads/ Ibid. FinanceTemplate/1_FFReport_Annual-Report-2008-09.pdf
64 End notes (continued)
xcvii cvi Adani Investor Presentation – 31 May 2013, accessed Powerlink Queensland, “Galilee Basin Transmission Project”, 20 August 2013, p. 7. For more details see: http://www.adani.com/ accessed 25 October 2013. For more detail see: Common/Uploads/InvestorRelationTemplate/2_InvBotDL_ http://www.powerlink.com.au/Projects/Central/Galilee_Basin_ Adani%20Group%20Presentation%20Aug%2013.pdf Transmission_Project.aspx xcviii cvii Department of State Development, Infrastructure and Deputy Premier, Minister for State Development, Planning, “Carmichael Coal Mine and Rail Project”, Department Infrastructure and Planning, Jeff Seeney, ‘Galilee Transmission of State Development, Infrastructure and Planning website, proposes electricity line’, Media Release, Queensland 23 September 2013. For more details see: http://www.dsdip. Government, 29 August 2013. For more detail see: qld.gov.au/assessments-and-approvals/carmichael-coal-mine- http://statements.qld.gov.au/Statement/2013/8/29/galilee- and-rail-project.html transmission-proposes-electricity-line xcix cviii Wayne Calder, BREE, “Outlook for Australian Coal”, Presentation Michael Roche, Chief Executive, Queensland Resources to Coaltrans Conference, 12 August 2013. Council, 21 October 2013, “Is the bubble about to burst? Australia’s competitive position in global coal supply”. c Australian Coal Association, May 2013 – referencing Port cix Jackson Partners September 2012 p. 26 “Opportunity at Risk” BHP Billiton presentation, “Coal Briefing”, 29 May 2013, slide 41. For more details see: http://www.bhpbilliton.com/home/ ci investors/reports/Documents/2013/130529_CoalBriefing.pdf Australian Coal Association, “Competing for Growth – The Real Transition”, Presentation to the Coaltrans Conference, cx 12 August 2013. http://www.indexmundi.com/commodities/?commodity=coal- australian&months=60 cii Peabody Energy, “Peabody Energy announces results cxi for the Quarter ended September 30, 2013”, Adani Group presentation, 20 Aug 2013, Slide 9. For more Media Release, 17 October 2013. For more details see: detail see: http://www.adani.com/Common/Uploads/ http://www.peabodyenergy.com/mm/files/Investors/Quarterly- InvestorRelationTemplate/2_InvBotDL_Adani%20Group%20 Results/Q313%20Rel%20FINAL.pdf Presentation%20Aug%2013.pdf ciii cxii Luke Forrestal, ‘BHP gives up on Abbot Point Terminal, Citi, The Unimaginable: Peak Coal in China , CitiResearch, cools growth elsewhere’, The Australian Financial Review, Commodities, September 4, 2013, Goldman Sachs, “The 4 November 2013. For more details see: window for thermal coal investment is closing, Commodities http://www.afr.com/p/australia2-0/bhp_gives_up_on_abbot_ Research, July 24, 2013. See also: Parker and Ho, Bernstein point_terminal_lFxnkCigU5XvsXCxdMSGGJ (Subscription required) Research and Deutsche Bank, “Thermal Coal” referenced in this report. civ Michael Roche, Chief Executive, Queensland Resources cxiii Council, “Is the bubble about to burst? Australia’s competitive Ben Caldecott, Head of Government Advisory, “Will old king position in global coal supply”, Presentation to Coaltrans World coal continue to be merry old soul?”, Bloomberg New Energy Coal Conference, Berlin, 21 October 2013. For more details see: Finance, 28 August 2013. For more detail see: https://www.qrc.org.au/_dbase_upl/Coaltrans%20World%20 bnef.com/WhitePapers/download/362 Coal%20Conference_%28WEB%29.pdf cxiv cv US Environmental Protection Agency, , “2013 Proposed Carbon Adani EIS, “Report for Carmichael Coal Mine and Rail Project”, Pollution Standard for New Power Plants”, US Environmental 15 November 2012, Volume 2, Section 2.8, p. 87. For more Protection Agency, 20 September 2013. For more detail see: detail see: http://www.adanimining.com/Common/Uploads/ http://www2.epa.gov/carbon-pollution-standards/2013- EISDocuments/71_EISDoc_Project%20Description.pdf proposed-carbon-pollution-standard-new-power-plants
65 End notes (continued)
cxv cxxvi Shar Pourreza, Jason Channell, Citi Research, Rising Sun: ‘Early Inquiry sets Abbot Point on rough path’, Implications for US Utilities, 8 August 2013. www.energycareers.com, 30 October 2013. For more details see: http://www.energycareer.com.au/news/early-inquiry-sets- cxvi abbot-point-on-rough-path Wacker Chemie AG, “The Next Five Years”, September 2013. For more detail see: http://www.wacker.com/cms/ cxxvii media/documents/investor-relations/equity_story_roadshow_ Adani’s record of environmental destruction and non-compliance presentation.pdf with regulations, Greenpeace, 11 February 2013. For more detail see: http://www.greenpeace.org/australia/Global/australia/ cxvii volunteer/Adani%27s%20record.pdf Ian Roper, Commodity Strategist, CSLA, “Limited room for recovery”, Presentation to Coaltrans Brisbane conference, cxxviii August 2013. Karnataka Lokayukta (27 July 2011) Report on The Reference Made by the Government of Karnataka Under Section 7(2-A) cxviii Of The Karnataka Lokayukta Act, 1984 (Part – II). For more http://www.greenpeace.org.uk/newsdesk/energy/news/ detail see: http://www.thehindu.com/multimedia/archive/00736/ china-coal-surge-flatlines Report_on_the_refer_736286a.pdf cxix cxxix Fayen Wong, “China mulls lifting coal export tax in 2014: Adani Ports Prospectus dated 5 June 2013, p. 181. For more paper”, Reuters, 12 October 2013. For more detail see: detail see: http://adaniports.com/frmProspectus3.aspx http://www.reuters.com/article/2013/10/12/us-china-coal- idUSBRE99B01X20131012 cxxx Gujurat High Court (2012) Order for Civil Application – For cxx Direction No. 3370 of 2011. Wu Wencong, “Tougher plan to reduce air pollution”, China Daily, 25 July 2013. For more detail see: cxxxi http://www.chinadaily.com.cn/ Gujurat High Court (2012) Judgement of Writ Petition (PIL) No. 194 of 2011. cxxi Zhou Wenting, “Shanghai to reduce PM2.5 20% by 2017”, cxxxii China Daily, 19 October 2013. For more detail see: MoEF (April 2013) Report of the Committee for Inspection http://usa.chinadaily.com.cn/china/2013-10/19/ of M/s Adani Port and SEZ Ltd. Mundra, Gujarat. Ministry content_17044642.htm of Environment and Forests p77. For more detail see: http://moef.nic.in/sites/default/files/adani-report-290413.pdf cxxii Yancoal Australia 2013 half year presentation, “Reaching new cxxxiii horizons together”, 16 August 2013. For more detail see: ‘Centre puts Adani SEZ on notice’, The Indian Express, http://news.iguana2.com/yancoal/ASX/YAL/750090 17 October 2012. For more detail see: http://www.indianexpress.com/news/centre-puts-adani-sez-on- cxxiii notice/963044 Deutsche Bank, Commodities Special Report: Thermal Coal at a Crossroads, 9 May 2013. cxxxiv ‘Govt denotifies Adani Group’s SEZ at Mundra’, cxxiv The Indian Express, 17 October 2012. For more detail see: Andrew Lawson, Cockatoo Coal Managing Director, http://www.indianexpress.com/news/govt-denotifies-adani- “Presentation to 9th Coaltrans Australia Conference, group-s-sez-at-mundra/1017782 Brisbane”, 13 August 2013. For more detail see: For more details see: http://www.asx.com.au/asxpdf/20130813/ cxxxvi pdf/42hmpcntwzq1q6.pdf “Environment Ministry slaps Rs200 crore fine on Adani Group”, The Economic Times, 4 September 2013,. For more detail see: cxxv http://articles.economictimes.indiatimes.com/2013-09-04/ North Queensland Bulk Ports Corp Media Release, 17 May 2013, news/41765520_1_environment-minister-jayanthi-natarajan- “Supplementary Report available for Abbot Point Dredging”. adani-group-mundra-port For more detail see: http://www.nqbp.com.au/wp-content/ uploads/2013/05/Media-Release-PER-Supplementary.pdf
66 End notes (continued)
cxxxvi cxIvi Ministry of Environment and Forests, “Constitution of committee Adani Presentation, “Adani Group: An Update”, 8 May 2012, p. 46. for inspection of M/s Adani Port and SEZ Ltd, Mundra, Gujarat”, cxIvii Office Memorandum,14 September 2012, For more detail see: Aurizon’s 2012/13 full year result presentation, 19 August http://moef.nic.in/downloads/public-information/01_order_ 2013. For more detail see: http://www.aurizon.com.au/ AdaniPort14092012.pdf investor/FinancialReports/Documents/FY13%20Results%20 cxxxvii Presentation.pdf Adani Ports Prospectus dated 5 June 2013 p. 37. For more cxIviii detail see: http://adaniports.com/frmProspectus3.aspx Andrea Davy, ‘NQBP to delay Dudgeon Point Coal Terminal cxxxviii project’, Daily Mercury, 26 June 2013. For more detail see: Dhananjay Mahapatra, ‘Coal Scam: 7 files, 173 applications http://www.dailymercury.com.au/news/dudgeon-point-coal- and 9 documents missing, says Centre’, The Times of India, 28 port-expansion-put-hold/1920750/ August 2013. For more detail see: http://articles.timesofindia. cxIix indiatimes.com/2013-08-28/india/41537412_1_coal-ministry- ‘Glencore Xstrata ditches Qld coal terminal plan’, coal-blocks-coal-india-ltd Business Spectator, 13 May 2013. For more detail see: cxxxix http://www.businessspectator.com.au/news/2013/5/13/ Aman Sharma & Samanwaya Rautray, ‘CBI seeks files and resources-and-energy/glencore-xstrata-ditches-qld-coal- correspondence from PMO on coal block allocation to terminal-plan Hindalco’, Economic Times, 23 October 2013. For more detail cI see: http://economictimes.indiatimes.com/news/politics-and- Samir Vora, Adani Chief Operating Officer, “Adani Group nation/cbi-seeks-files-and-correspondence-from-pmo-on-coal- in Australia”, MAIN Members Breakfast, 7 October 2011. block-allocation-to-hindalco/articleshow/24558060.cms For more detail see: http://dpwealth.com.au/media/adani_ cxI presentation_2011.pdf Deshmane, Akshay (2012) Forest panel rejects Adani’s coal cli proposal. DNA India Available from: www.dnaindia.com/india/ Rosemary Arackaparambil and Prashant Mehra , report_forest-panel-rejects-adanis-coal-proposal_1742575 ‘India’s Adani to press ahead with Australia coal plans’, Reuters, cxli 25 September 2012. For more detail see: http://www.reuters.com/ Adani Power Annual Report 2012/13, p. 99. For more article/2012/09/25/us-india-adani-idUSBRE88O11I20120925 detail see: http://www.adanipower.com/Common/Uploads/ clii FinanceTemplate/1_FFReport_Annual_Report_APL_2012-13.pdf ‘Production from Carmichael project in Australia expected by cxIii 2015’, Press Trust of India, 2 December 2012. For more detail Adani Ports Prospectus dated 5 June 2013 p. 175. For more see: http://profit.ndtv.com/news/corporates/article-production- detail see: http://adaniports.com/frmProspectus3.aspx from-carmichael-project-in-australia-expected-by-2015-adani- group-314147 cxIiii Adani Ports Prospectus dated 5 June 2013 p. 175-179. For cliii more detail see: http://adaniports.com/frmProspectus3.aspx Adani’s North Galilee Basin Rail Initial Advice Statement, May 2013, section 1.5.3, p. 8. For more details see: cxIiv http://www.dsdip.qld.gov.au/resources/project/north-galilee- Adani Ports Prospectus dated 5 June 2013 p. 181. For more basin-rail/ngbr-ias.pdf detail see: http://adaniports.com/frmProspectus3.aspx cliv cxIv Adani EIS, “Report for Carmichael Coal Mine and Rail ‘Adani Ports Said to Be Investigated by India on Possible Money Project”, 15 November 2012, Section 2.8, p. 45. For more Laundering’, Bloomberg, 9 March 2012. For more detail see: detail see: http://www.adanimining.com/Common/Uploads/ http://www.bloomberg.com/news/2012-03-09/adani-ports-said- EISDocuments/71_EISDoc_Project%20Description.pdf to-be-investigated-by-india-on-possible-money-laundering.html
67 End notes (continued)
clv Samir Vora, Chief Operating Officer Adani, “Adani Group in Australia”, MAIN Members Breakfast, 7 October 2011, p. 26. For more detail see: http://dpwealth.com.au/media/adani_ presentation_2011.pdf clvi http://www.dsdip.qld.gov.au/assessments-and-approvals/ north-galilee-basin-rail-project.html clvii Andrew Fraser, ‘Galilee exports delayed until 2017’ The Australian, 30 August 2013. For more detail see: http://www.theaustralian.com.au/business/ mining-energy/galilee-exports-delayed-until-2017/ story-e6frg9df-1226706997266 clviii ‘Adani Australia head quits amid $11bn coal project delay’, Reuters, 17 May 2012. For more detail see: http://www.reuters.com/article/2012/05/17/adani-australia- idUSL4E8GH8RP20120517 clix Mundra Port and SEZ Ltd Bombay Stock Exchange release, 3 May 2011. For more detail see: http://www.mundraport.com/newsroom/MPSEZL_BSE.pdf clx Adani Ports, “Bowen Business Information Forum”, 7 March 2013. For more detail see: http://wmdl.com.au/Portals/3/ Documents/Events/Adani%20Port%20-%20BBIF%20 Presentation%20%20-%2007032013.pdf clxi Samir Vora, Chief Operating Officer, 7 October 2011, “Adani Group in Australia”, MAIN Members Breakfast, page 41. For more detail see: http://dpwealth.com.au/media/adani_ presentation_2011.pdf clxii Gillian Tan, ‘Rio Tinto Coal Mine Draws Three Bidders: Deal Talks Stalled After Offers Fell Short of Rio’s Expectations’, Wall Street Journal, 30 September 2013,. For more detail see: http://online.wsj.com/article/SB100014240527023034645045 79106590565891408.html. See also the Sarah Thompson, ‘Rio Tinto to announce deal for Clermont stake’, Australian Financial Review, 26 October 2013. For more detail see: http://www.afr.com/p/business/companies/rio_tinto_to_ announce_deal_for_clermont_3NwUXAMZooqibJ2IhGQdPI (subscription required).
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